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A Week of U-Turns

This week the benchmark indices slipped to extremely low levels only to bounce back. The market remains jittery with bad news on every front

This week, Sensex and Nifty closed below the 13,000 and 4,000 mark, respectively. Some say it was the beginning of the bear market while others were of the opinion that the bottom was in sight. No one can be sure of either opinion but the market remains vulnerable to bad news. And of that there is no dearth of bad news. Crude oil prices, rising interest rates, inflation and a global economic slowdown are playing havoc with equity markets across the globe. The dollar remains weak (except against the rupee), which will continue to fuel the rally across various commodities. Oil continued to rise on reports of Israel likely to attack Iran this year, which could threaten oil supplies from the Middle East. And of course, we also have political woes back home.

The bulls got off to a bad start on Monday. The interest rate sensitive sectors were badly hit with the BSE Realty and the BSE Bankex indices plunging. However, bucking the negative trend were the BSE IT and the FMCG index. If Monday was bad, Tuesday was worse. Market sentiment was pathetic with the Sensex closing at 12,961.68 and the Nifty at 3,869.75.

On Wednesday, things took a turn for the better. The Sensex crossed the 13,000 mark and Nifty the 4,000 mark. While it was a relief to see the market snap its losing streak, it was a very volatile session with the benchmark indices witnessing wild gyrations throughout the trading session. But the rally brought little comfort to the bulls who were once against thrashed on Thursday. Among the BSE Sectoral indices, all closed in the red. Even the BSE Mid-Cap and the Small-Cap index fell.

The week finally ended on a good note. According to latest data, inflation rose to 11.63% for the week ended June 21. This news was welcome since it remained below 12%, contrary to expectations. Meanwhile, the political tension over the Indo-US nuclear deal also eased after SP leaders Mulayam Singh Yadav and Amar Singh said the party favoured the deal. As investor sentiment improved, recently battered realty, capital goods and power shares attracted buying and ended with smart gains.

The next big trigger will come from this financial year's first-quarter results, starting July 11. Everyone is watching to see how India Inc is coping with slowing growth momentum and rising costs. Operating margin is an area of concern.