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Cheer Replaces Panic

The crash in US markets, a reeling economy drags the sensex to its four months low

The market remained range bound with a few points decline almost every day of the week. Overall, the market fell 60 points on the BSE Sensex -- 1.83 per cent decline. With Reserve Bank unsure about the timeline for the economy to be on track and uninspiring news of low consumer confidence and dismal productivity figures in the US, dampened the spirits of the brief cheer in technology stocks. All this lead to a marginal decline in volumes and selling pressure in both technology and old economy stocks.

On the positive side, Dr. Reddy's announced that the company filed for a new drug -- ondansetron tablets (an anti-emetic drug) with the US Food and Drug Administration. And Ranbaxy announced that it has received FDA approval for manufacturing Lorazepam tablets used for curing anxiety disorders. Bombay High court ruled that seven bulk drugs do not fall under the purview of price control. This ruling will benefit few pharma companies. Series of open offers from the foreign partners in order to consolidate their Indian holdings lifted up the hopes of MNC scrips. Media stocks gained volumes as the Gujarat High Court ordered the eased trading norms in two scrips - Mukta Arts and Balaji Telefilms. The positions in the two scrips can be squared off within the week now, as against the daily squaring off required in trade-to-trade segment.

RBI released its annual report for the 2000-01, confirming the obvious -- the slowdown in the economy especially in the industrial sector. The government has completed 50 per cent of fiscal deficit target for the year in just four months and with the tardy tax collections and disinvestment proceeds, the fears are abound that the same will breach the upper limit. The Reserve Bank pointed that economy growth at 6-6.5 percent is contingent upon the revival in industrial production, the restoration of trust in the scam struck financial system and a good monsoon.

Dow Jones ended the week below the psychological mark of 10,000 for the first time in almost five months on the worries of declining consumer spending. Weak economic stats and disappointing news from the tech sector resulted in the US markets falling sharply during the week. With fears of weak consumer spending, which has been the only support to an otherwise weakening economy, could drag the slow down in a full scale recession. With announcements of layoffs and profit warnings still pouring continues to add to the market's weakness.

Outlook
Market is likely to remain range bound in the absence of any trend turning event. Stock specific news might give select individual stocks some distinct direction. Key Indian Pharmaceutical stocks with their relative strength in recent times backed by good Q1 results, export competitiveness in generic market might regain attention. Earlier leading players -- Ranbaxy, Cipla and Dr Reddy's touched their 52-weeks high. But the euphoria was short-lived as their generic version faced patent violation in US. The surge in volumes of individual stock options from 123 lakh shares in July contract to 427 lakh shares in August contract at NSE indicates that market participants are getting attuned to the new trading products. The government's seriousness to keep its borrowings within limits, the quickness with which the ailing term lending institutions are revived can have a bearing on the market sentiment.