The Hindu Business Line : Large-cap stocks favoured in the rally

STOCK prices opened on a flat note and stayed in the negative territory for much of the morning. Prices began to firm in the afternoon trade and just before close, rose strongly and select stocks ended the day with handsome gains. Sensex ended the day with a gain of about 1.75 per cent while Nifty ended the day with a gain of about 2 per cent.

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The rally had a distinct large-cap bias. CNX Midcap 200 rose only 0.7 per cent and Nifty Junior too gained only 0.6 per cent. In addition, 76 per cent of A group stocks advanced compared to a lower 59 per cent for B1 group and 52 per cent for B2 group stocks.

The Railway Budget may have been behind the rise in price. That stocks such as Hindalco, Nalco, Tata Steel, Grasim and BHEL led the rally, perceived beneficiaries, suggests that the Railway Budget proposals made its impact. The strength of the rally and the fact that 28 out of the 30 Sensex stocks rose in value, however, suggests that short covering too may have played its part. Infosys and Bajaj Auto were the only stocks to decline in value.

PSU stocks firm up: Stocks of public sector firms — 37 out of the 48 stocks in the BSE's PSU index registered gains. Major gainers include BHEL, ONGC, SAIL, NALCO, Shipping Corporation and Vijaya Bank. SAIL led the steel sector pack as the markets cheered the fact that freight rates have not been raised. NALCO gained along with Hindalco given the Railway Budget announcement that aluminium wagons may be tried out by the Indian Railways. Bharat Earth Movers, which also derives a significant portion of its revenues from the Indian Railways, also gained in value.

Power stocks surge: A number of power sector stocks also rose in value. Power producers such as Tata Power, Reliance Energy, Neyveli Lignite and CESC firmed up. Power equipment producers such as BHEL, ABB and KEC International also rose in value. Freight rate for movement of heavy machinery was brought down in the Railway Budget.

Consumer durable stocks out perform: Stocks such as Titan, Blue Star and Samtel Colour rose in value. Rumours that Samtel Colour has bagged a large order sent the stock spiraling up by 7 per cent. None of the 11 stocks in the BSE consumer durable index lost value on Tuesday.

Mixed trend in private banks: Stung by the RBI's draft policy framework on ownership, select stocks of most private sector banks encountered intense selling pressure on Monday. On Tuesday, however, shareholders in some of the stocks met with more of the same. Stocks of ING Vysya Bank, Federal Bank and Karur Vysya Bank were some of the major losers. The stock of UTI Bank also shed five paise. The stocks of South Indian Bank, IndusInd Bank, Kotak Mahindra Bank and HDFC Bank bucked the trend.

News and stocks:

*The stock of MosChip Semiconductor rose 11 per cent. The company announced that its rights offer at a price of Rs 35 per share has closed. The stock is still trading at a discount to the rights offer price.

*The stock of Mandovi Pellets rose 20 per cent to trade at Rs 12. The company is being merged with Chowgule & Co. Shareholders are slated to receive cash or preference share worth Rs 10 only for every share held.

*The stock of Power Trading rose 3.8 per cent. The company obtained a license to trade electricity

*The stock of VSNL rose 3.2 per cent. The company settled its differences with FLAG Telecom

*Stocks of MP Birla Group - Vindhya Telelinks, Birla Corporation and Universal Cables rose in value. The main promoter of these firms, Ms Priyamvada Birla passed away on Saturday and there is uncertainty regarding the successor to the promoter's controlling stake in the MP Birla group companies.