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Rally Loses Steam

Corrective market after a sustained market was plagued by uncertainty once again. Notwithstanding any significant happening, the market should be in an oscillatory mode again for a cooling

After 11-weeks of consecutive gain, the market lost steam. And the attack on parliament only catalysed the correction. The BSE Sensex lost 82 points (2.4 percent) and Nifty was down 24 points (2.19%). Both the old and new economy stocks fell on profit booking. The foreign institutional investors were the first to run for cover with a net sale of Rs 143 crore on the day of attack. On the contrary the domestic funds, flush with marginal inflows were started buying briskly.

Despite shedding gains, the turnover was on the rise with an aggregate average turnover at NSE and BSE Rs 4850 crore against Rs 4771 crore last week. The falling market on high volume reflects bear dominance now. Another indicative bear pointer was a 5.8 per cent fall in average volume and value of traded stock futures. Satyam Computer was the most active contract for the week.

After rapid strides in recent months, and with a dramatic 20 per cent gain just last week, the BSE IT Index tanked – down 6 percent. Profit warning by few US tech heavyweights depressed tech die-hards. BSE also retarded the permeating bull in the second rung technology stocks, as 27 stocks including Geometric Software, Mascot System, Aksh Optifibre were placed in the trade-to-trade settlement mode, without any carry-forward. Interestingly, 12 of the 27 stocks (the stocks for which we could get the prices) fell by an average 72 percent in 1-month between November 10 and December 10. This amply reflects high speculation in these stocks.

With sharp fall in technology and the attack on the parliament, investors showed preference for large cap defensives, mainly the FMCG, healthcare and oil stocks, which also gained on the day of the attack. Castrol was a big gainer (6.6%) as shareholders approved the amalgamation of Tata-BP with the company. Cadbury India's also gained 5.2 per cent this week when its parent announced its plan to acquire the 49% public shareholding through an open offer at Rs 500 per share. This will lead to de-listing from the stock exchange. Another offbeat gainer was the telecom giant VSNL rising by 3 per cent on the eve of its king-sized 750 percent dividend, ahead of its disinvestment.

In the US, another rate cut failed to enthuse the market. The NASDAQ fell 3.4 per cent and the Dow Jones fell by 2.4 per cent during the week.

Outlook
Corrective market after a sustained market was plagued by uncertainty once again. Notwithstanding any significant happening, the market should be in an oscillatory mode again for a cooling.