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Volatile Days

The stock market keeps going through sharp ups and downs. But the immediate deciding factor next week will be the government's vote of confidence

While downgrades were more or less anticipated, when they did take place it affected sentiment. Fitch revised its outlook on India's long-term local currency Issuer Default Rating (IDR) to Negative from Stable. The reason: "The revision to the local currency outlook is based on a considerable deterioration in the central government's fiscal position in 2008-09 (FY09), combined with a notable increase in government debt issuance to finance subsidies not captured in the budget," James McCormack, Head of Asia Sovereign ratings, was quoted as saying.

On Monday, the bulls were able to hold on to their gains for a major part of the day, but lost ground towards the fag end of the session. The downfall could be attributed to selling witnessed in IT heavyweights like Infosys, Satyam and TCS. But even the mid- and small-cap indices were under pressure. Finally the Sensex lost 139 points to close at 13,330 and the Nifty slipped 9 points to close flat at 4,039.

But the Monday slump paled in comparison to Tuesday's crash. Unabated selling in scrips across the sectors dragged the key indices to a 15-month low with the Sensex closing at 12,676.

Wednesday was another bad day for the stock market, but thankfully the week ended on a good note. On Thursday, the losing streak was snapped and Friday saw the market rise with banking stocks like ICICI Bank, HDFC Bank and Axis Bank taking the lead. Infotech stocks were not that lucky.

After suffering at the hands of the bears for several days, the bulls finally had the last say this week. Crude oil lost nearly $16 per barrel during the last few trading sessions. The U.S. market slumped earlier in the week but did witness a rally later. Inflation, which was expected to cross 12%, inched up only marginally to 11.91%.

There are a lot of factors affecting the market right now. Next week's confidence vote in parliament – which will decide the fate of the ruling UPA coalition – and crude oil prices will be the determining factors. While high inflation is what we all have to live with, a rise in interest rates could undermine sentiment.