A peek at the new 52-week highs on the bourses surprisingly reveals a host of finance companies. From industry majors like Kotak Mahindra and Sundaram Finance to relatively unknown companies like Bampsl Securities and Magnum Fincap, the rise has been phenomenal. So, does this mean that the fortunes of NBFCs are taking a turn for the better? The fundamentals do not justify the sudden buying interest in finance stocks. Most of the companies have reported a dip in revenues and earnings in the first-quarter of 1999-2000. The rally in the finance sector has been so blind that investors have failed to take cognisance of the ground realities. Consider the case of a company like VLS Finance.

Despite the Reserve Bank of India ordering a probe into the books of the company, the stock has been on the rise. On Tuesday, the stock touched a new 52-week high of Rs 24.

The way second-rung steel stocks are performing on the bourses, it would suggest a major turnaround in the sector. However, it may be early days yet. Although some categories of steel are witnessing good demand along with rise in prices, the prices of steel scrap are not showing any signs of reversal in trend.

There are reasons to expect scrap prices to remain within bounds, at least for the time being. For a revival in the sector, it is necessary that the two move in tandem. With the cement sector showing indications of a revival, the market seems to be betting on the steel sector. The logic is that cement despatches are rising, so it is just a matter of time for the steel sector to turn the corner.

Notwithstanding the poor state of affairs in the chemical industry, the mid and small cap companies in the sector are rallying on the bourses. Nearly 18 chemicals stocks in BSE's Group B1 and B have touched a new 52-week high in the last two days. However, the rally at these counters is not supported by fundamentals, as there is hardly any improvement in business confidence.

Nevertheless, the current rally in these stocks provide an opportunity for investors to exit from these stocks. Names like Ashok Alco, Graur & Weil, Himadri Chemicals, Orient Carbon & Chemicals, Savita Chemicals, Shasun Chemicals, Aluflorides, Avon Organic, Thirani Chemcials and Indo Borax figure in the list of new highs.

Clear signs of a revival or turnaround in the economy would be visible only in the second or the third quarter of the current financial year. Thus, it may be too early to rejoice.

The blind rally in the markets has lifted the stocks of loss-making companies or stocks from industries not performing well. Investors, thus, need to be careful before its too late and are left holding valueless paper.

With contributions from Sunita Nagpal & Jai Kumar NR.