On Friday, stock prices of both VSNL and CMC Ltd touched the upper circuit of 16 per cent at both the major bourses after the Cabinet Committee on Disinvestment (CCD) on Thursday cleared the proposal of strategic sale in these two companies. Besides VSNL and CMC, other PSUs which were in the limelight on Friday included BPCL, BHEL, Bharat Electronics Ltd (BEL), Chennai Petroleum, and HOCL. All these stocks were locked in upper circuits of 16 per cent.

The CCD decided to sell 25 per cent shares in VSNL to a strategic partner (with the government retaining 26 per cent), who would make an offer to buy 20 per cent equity from the market. In case of CMC, the government has decided to bring down its stake from 83 per cent to 26 per cent.

The benchmark BSE Sensex opened moderately down at 4280.96 and later turned around and moved gradually upwards to the day's high of 4373.40 before the day's high of 4373.40 before closing at 4352.26 over Thursday's close of 4286.11, a net gain of 66.15 points. The S&P CNX Nifty also closed with a gain of 19.70 points at 1378.85.

CMC Ltd touched the upper circuit at both the NSE and the BSE. The stock reached an intra-day high Rs 355.10 at the BSE while at the NSE, it touched the intra-day high of Rs 355.20 and remained locked at these prices.VSNL also hit the upper circuit. The stock reached an intra-day high of Rs 382.15 at the BSE while at the NSE the stock closed at Rs 357.35.CMC recorded aggregate volumes of around 80,000 shares traded at both the exchanges while VSNL recorded trading volumes of 3,87,000 shares.

Dealers said the rally in PSU stocks led to a strong turnaround in sentiment with majority of old economy shares surging up handsomely on hectic short-covering on the last day of the current settlement and even fresh buying by operators. Having raised hopes that the divestment programme that had been delayed would now be continued in other key PSUs, the clearance has come as a shot in the arm for the sagging market morale.

The decision improved sentiment so much that it discounted the imposition of two per cent direct tax surcharge on individual and corporate tax for the assessment year 2001-02.

Welcoming the disinvestment decision, dealers said the consistent net investments by foreign institutional investors (FIIs) since the beginning of year too was the major driving force behind the strong undercurrent.

However, FMCG majors HLL and Colgate along with Tata Engineering, Castrol and Glaxo were the major losers.