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Its Lacklustre as Usual

While rain gods have again contributed their bit with 13th successive normal monsoon, economic revival is now in the hands of finance ministry mandarins

The market remains on an aimless drift. Low volumes, selling by domestic institutions with every rise, a sluggish economy and government's dithering on key reforms has ensured that the market stays grounded at 3300-levels. No wonder, the indices continued to be range-bound during the week with the 30-stock Sensex gaining paltry 8.8 points. Volumes also remained well below Rs 2000 crore for most of the week, largely attributed to shifting of Balaji Telefilms and Mukta Arts to rolling settlement. While FII inflows have tapered off with net investments at only Rs 41 crore for the current week, the important point is that foreign investors continue to invest in Indian equities. Among the positives, Indian pharma companies were demand on the back of favourable developments in the US generic market. On the other hand, cement stocks were weak due to a reported breakdown in the cartels, thereby bringing down cement prices. Amidst the current gloom, there was more bad news for the economy with core sectors growing at only 1.2% for July 2001 against 6.1% for the same month last year. While cement and crude petroleum were in the negative territory, electricity generation provided the silver lining with a higher growth at 4.2 per cent. Further, both NCAER and rating agency, ICRA projected a less than 6% growth in GDP for the current fiscal. Credit offtake has also plummeted so far in the current fiscal as loans to commercial sector have grown by only Rs 1900 crore against Rs 18,550 crore for the same period last year. The government seems to heading nowhere on disinvestment and has acknowledged that even the existing bidders seem to be losing enthusiasm on account of various roadblocks. Apart from the usual fracas and unanimity on a 300% jump in salaries with other perks, the Parliament has achieved precious little this session.

Despite a 25-basis rate cut by Federal Reserve, there was little guidance from the US markets with the reduction failing to lift spirits. In one of its most determined rate slashing campaigns, the Fed has cut interest rates seven times in the current calendar with the key Fed funds rate now at 3.5 per cent. Yet, there is little indication to suggest a recovery. While the Fed is still open to more rate cuts since there is little threat of inflation, the onus is on consumers now to start spending and ignite growth. After net losses for the week, Nasdaq revved up by 74 points on Friday on the back of upbeat guidance from networking giant Cisco and upbeat comments by Lucent.

Outlook The markets are likely to remain lacklustre in the near future with little to trigger buying into beaten down stocks. Investors are shying from taking fresh bets in the absence of any clear signs of improving fundamentals and better corporate profits. While rain gods have again contributed their bit with 13th successive normal monsoon, economic revival is now in the hands of the mandarins. Thus, with monsoon coming to an end, it is time the government unveiled a well-framed investment programme to recharge a slowing economy. The sentiment is also expected to perk up if the government takes some decisive measures on disinvetsment.