There was a major rally in the banking- and financial-sector stocks such as ICICI, which almost hit the upper circuit, and IDBI, besides in major bank stocks such as SBI and Corporation Bank. For some part, the news of apossible revival in the steel industry and some signs of recovery in the commercial- and heavy-vehicle sector (based on projected production figures available from Telco) have helped buoy the sentiment for financial-sector stocks.

Revising software prices: The denial from the Pentafour Software management that the company has not really defaulted on its fixed-deposit repayment has cut little ice with the stock market. The stock continued to drop taking other software stocks down with it on Monday. Last week, the news had spread in the market that the company had defaulted on a part of its FD payments amounting to Rs 89 lakh, and had asked for a 12-month extension to repay the amount in equal monthly installments. This led to a lot of liquidation by some leading foreign funds.

It was rumoured in market circles for some time that Pentafour Communications, a sister concern, was in financial trouble, and had been having cash-flow problems. So, it was only a matter of time before Pentafour Software's cash flowwas diverted here. That aside, the market had for a long time ignored the poor market reputation of some of the software companies' managements, and now the question everyone seems to be asking is, if there could be a diversion of funds in a company such as this, there could be a diversion in other companies as well. Thus the surge in selling in software at the moment.

Since the last one week, the Pentafour stock has already fallen by 13 per cent. Rolta, which had reported excellent half-yearly results, nonetheless fell by a similar amount, while Satyam Computers has fallen by 5-6 per cent.Recovery in petrochem stocks: The stocks of Reliance and IPCL have been showing steady signs of recovery, after being at their 52-week low for a long time. Both these stocks have earned buyers' interest in the last one week. While Reliance gained more than Rs 13 to close at Rs 123, IPCL also has gained Rs 10.

While some of the rise can be attributed to a buyback possibility in the case of Reliance, IPCL does not havethe cash for buyback. Possibly one of the reasons that could be driving stock prices is the rise in polymer prices in the last three months. Prices of all the three polymers produced by these two companies have risen in the range of 14.7 per cent to 19.6 per cent, from the lowest levels in August 1998. Moreover, the steepest rise in price was announced by Reliance on November 6, followed by a similar price rise announced by IPCL.

Approximately, 45 per cent of revenues of RIL and around 67 per cent of the revenues of IPCL are through sale of polymers. An average 15 per cent increase in realisations will definitely revise the topline and bottomline sale targets for both these companies. But one should keep in mind that the present rise in polymer prices is partly owing to the enhanced demand in China. It is expected that the Chinese demand will reduce partly in January 1999, which has the potential to reduce polymer prices, affecting the earnings of companies in this industry.