The BSE Sensex gained 19 per cent from 3326 points at the end of April to 3963 points on May 31, while the National Stock Exchange (NSE) Nifty was up by 16 per cent from 978 to 1132 points during the month.

Malaysia's Kuala Lumpur Stock Exchange Composite index, appreciated by 10 per cent from 675 to 743 points, and was the only other market in the region to provide positive returns during the month. Bangkok SET index in Thailand dropped marginally from 459 points to 453 points during the month while in Phillipines the Manila Composite index dropped by 0.57 per cent to 2420 points from 2434.

"The gain by Indian markets was primarily due to re-rating of cyclical stocks by foreign institutional investors (FIIs) on anticipated revival of the economy," Ashu Dutt, chief executive Dutt Stock Broking said. The rally in domesticstock markets was mainly on account of FIIs doubling their investment in the country to around Rs 1,750 crore in May from Rs 965 crore in April.

Subrata Ray of DBS Securities felt the rise in share prices in May was due to undervaluation of Indian stocks compared to other emerging markets in Asia, which gained phenomenally in April. In April this year, Thailand markets were up by 29 per cent, Malaysia 34 per cent, Phillipines 20 per cent, while India was the only market which provided negative returns.

During the month the BSE Sensex dropped by 11 per cent and NSE Nifty by nine per cent due to the fall of Vajpayee government. In May, Hong Kong's Hang Seng index was down by nine per cent from 13,333 to 12,147 and Japan's Nikkei index dropped by 3.5 per cent to 16,111 from 16,702 points at the beginning of the month.

"The rally was due to uptrend in commodities stocks in India due to international prices of major commodities rising," Dutt said adding that in S-E Asia there were very few commoditystocks.

"In this region there are large number of banking and finance company stocks but very few commodity stocks," he said. Ray said rise in Indian markets was also due to a technical correction in other Asian markets and the additional money which was allocated to this region.

A large portion of this allocation came to India specially from hedge funds, he said. Among the commodity stocks which were up in May included Reliance Industries up from Rs 129 to Rs 167, Grasim from Rs 113 to Rs 172, Larsen and Toubro from Rs 187 to Rs 244.

Other commodiity stocks in the limelight included Hindustan Petroluem which increased from Rs 187 to Rs 244, Tisco from Rs 80 to Rs 109 and Tata Chemical from Rs 55 to Rs 65 during the month.