Seshasayee Paper, for example, has risen by over 40 per cent to Rs 37.80 in the last ten trading sessions. On Monday, the stock hit the upper-end of the circuit filter and remained frozen with a pending buy order. Orient Paper Mills touched a high of Rs 32.65, but closed marginally lower at Rs Rs 31.60. Balkrishna Industries scaled a new 52-week high of Rs 42.50. SI Paper remained frozen at its new high of Rs 21.05 for most part of the day.

Even a low-priced stock like Star Paper Mills has zoomed by an amazing 98 per cent in the lest ten trading sessions on hopes of a turnaround in the paper industry. Rama newsprint, too, has spurted by over 50 per cent to Rs3.85, while Nath Pulp has jumped up by 32 per cent to Rs 4.75.

The buying interest in these stocks stems from the perception that the worst is over for the paper industry. Rising international prices has resulted in Indian paper producers hiking their prices in the last three months by Rs 500-1000 per tonne. Industry watchers also say there has been a marginal pick-up in demand thanks to the shut-down of a few operating mills.

After a long period of gloom - precipitated by the economic recession and shrinking demand - analysts say there is hope for the sector. Prices of wood pulp in the international market has been rising. After stagnating below $ 450 per tonne for most part of 1998 and early 1999, global pulp prices have breached the crucial $ 500 per tonne mark.

The rise has been aided by the recovery in the south-east Asian economies as well as closure of some mills in the US. Another positive sign is that the inventory levels, which had climbed to alarming levels in the past one-and-a-half years,has come down substantially. Although demand for paper is yet to pick up substantially, marketmen seem to be targeting the smaller players in the industry in the hope that the rise in prices will improve profitability. Moreover, with elections round the corner, demand for paper is bound to pick up.

However, excess capacities, built-up during the boom period, will continue to add pressure on margins.