Tech stocks boom again, Sensex spurts 224 points

The fixing of lower badla charges of nearly 12 cent per annum and the sharp drop in the net outstanding positions last week-end influenced the sentiment. Reports that FIIs had pumped Rs 1,200 crore into the Indian bourses in the past few sessions too and entry of several stocks in the "no-delivery" period too fuelled buying spree.

In the high-flying software sector, 30 leading shares surged to hit the daily circuit breaker limit of eight per cent curbing their trading volumes. Shares of the four new entrants into the BSE Sensex were sharply higher in afternoon deals, while the outgoing firms’ shares fell as investor interest dwindled. Pharmaceutical firm Dr Reddy’s Laboratories was up Rs 92.05 at Rs 1,617, software firm Satyam Computer Services Rs 289.40 up at Rs 3,907.35, media firm Zee Telefilms Rs 72.55 up at Rs 979.70 and Reliance Petroleum Rs 2.40 up at Rs 63. Reliance, HLL and L&T shot up from the old economy sector. Infosys was up 8 per cent, or Rs 728.75, higher at 9,838.85, NIIT Rs 127.40 at Rs 1,720.35 and Wipro Rs 425 at Rs 5,737.90.

Dealers said the four new shares have been favoured in the market, with most of them in the new economy or knowledge-based sectors. “Their inclusion in the benchmark index will attract investors, particularly funds which track the index,” they said. Among replaced stocks Tata Power was down Rs 3.30 at Rs 64.20, Tata Chemicals Rs 0.90 at Rs 54, Industrial Development Bank of India Rs 3.65 at 42.10 and Indian Hotels Rs 1.55 at Rs 245.

They said markets have regained stability and confidence after a stunning 7.24 per cent rise on Friday calmed nerves battered badly on Tuesday when it plunged 7.19 per cent with its second largest point drop of 363.12 points in history. But brokers said that investors are cautious over software stocks after last week’s slump. "Tech shares will definitely do well but we are recommending a mix of old and new economy stocks," said a dealer.

Last week’s neck-snapping technology volatility — particularly last Tuesday’s crash which saw the BSE Sensex fall as much as 361 points — shook the faith of those who had ardently believed that the new economy rally would never end. On Friday, they appeared to have swallowed their fear and plunged back in.

The key to this week is the strength of that renewed optimism, analysts say. Some strategists believe that last week’s tumult may leave a legacy of caution in its wake, making the faith no less strong but perhaps a little less blind. Others scanning the market mood believe the shake-up merely convinced investors that a heavy sell-off ain’t what it used to be. "I see this market as becoming a market which will become more discriminating and rallies in stocks which previously did not reflect particularly discriminating accumulation will be more precisely classified as bear market rallies," said an analyst.

Top-tier stocks will continue to attract the buying they deserve, but many of the small and mid-cap stocks that had been carried along by the tech-stock buying wave are still in full-fledged retreats and may never again reach the heady levels they touched in the run-up, brokers said.