With 16 of the 33 scrips going into the compulsory demat mode on April 5 having a combined weight of over 65 per cent in the Sensex, marketmen expect a fresh rally of 400 points over the 3500-level.

Says Prateek Agrawal of SBI Caps, ``I expect the Sensex to touch 3850 in April primarily because of the scarcity of floating stock in securities entering the compulsory demat mode. Besides, the on-going correction in the Sensex on account of technical factors will provide a good entry opportunity for domestic mutual funds after their year-end accounts.''

According to Agrawal, retail investors typically send their shares for demat after the due date. ``As it takes about seven days for the demat process to be completed, it leads to a scarcity of floating stock in securities especially where thepublic shareholding is large. Operators exploit this opportunity to jack up the prices and this is exactly what we could see in the first week of April. Besides, once a security is in the demat mode, institutional interest builds up which aids sentiments in the counter,'' adds Agrawal. The fact that this time around scrips like Reliance, ITC, HLL as well as market favourites like Satyam Computers and Pentafour Software are entering the compulsory demat mode, will also contribute to the overall bullish sentiment.

Adds Vivek Kumar of Motilal Oswal, ``Apart from the push on account of the compulsory demat, April also is the time when most domestic mutual funds enter the market for fresh purchases after considerbale profit-booking in March-end. This should perk up sentiments. Personally, I think the Sensex will continue to remain firm above the 3700-level.'' Agrees, Vineet Agarwal of Acumen Securities. ``The technical reaction is almost complete; at most, we could see a mild correction on Tuesday. BeginningWednesday, it would be a dream-run for the bulls,'' he adds.

Milind Karmarkar, head of research, Dalal & Boracha, says, ``Historically, the Sensex has witnessed an uptrend in April. In 1996, for instance, the Sensex hovered around 3250 for most part of March. But in April, the index witnessed a strong rally and touched a high of 3950 on April 25. Similarly in 1997, the Sensex closed at 3360 level on March 31 but by the third week of April it had touched 3864.77. For 1998, too, the story was the same. On March 31, 1998, the Sensex was at 3892 level, but by April it touched a high of 4286.'' Ajay Srinivasan of ICICI-Prudential also feels the firmimg up of indices is evident next week. ``Till now, we have seen the unwinding of long poisitions and now we are set for an upturn. Fresh FII buying should be underway as the prices are attractive now. Besides, the market also expects some good news on the insurance front,'' he adds.

P N Vijay, CMD P N Vijay Financials Ltd, disagrees on the demat logic, but says weare seeing a build-up to a rally in April. ``Earlier, too, the market had anticipated that with scrips like SBI entering complusory demat, sentiments in the counter would improve. But, this did not materlise. This time, too, I am less confident of the rally on account of demat.

However, that the Sensex is taking a breather at 3550, it is a healthy sign as it could signal a run to the 4,000-mark. What is even more important is that the April rally is likely to be a broad-based one. Factors like the Budget being passed with no major changes and forecast of a good foodgrain output should fuel the fresh rally, while a good exim policy will be the icing on the cake,'' says Vijay.

Technically, too, the Sensex seems poised for a rally. It gained nearly 600 points after the Budget, with the highest level being 3817. However, since March 23, the index has been on a downslide thanks to the year-end pressure and profit-booking by FIIs. In the last 5-6 trading sessions, FIIs pulled out close to Rs 330 crore and, inall, the Sensex has lost almost 160 points. With the valuations turning attractive after the fall, the time seems ripe for a rally. Brokers also discount fears of profit-booking in April as a result of the capital gains tax reduction for resident Indians.

``I don't think, selling pressure will be great on this account. FIIs already pay a lower tax of 10 per cent and so do mutual funds and they are the key market players,'' says Agrawal of SBI Caps. Vineet Agarwal of Acumen also feels the impact will be negligible as brokers can avail of the lower rates even if they sell now. ``As the pay-in is only next week, it does not matter if someone sells now and that is probably what is happening in the market,'' he adds. Kumar of Motilal Oswal says a few old FMCG and pharma stocks could see some selling pressure on account of the rise in their prices over the past one year. IT scrips will, however, be spared as most of them have been added to portfolios recently.