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Dalal Street Shed Tears

Market slipped further with brisk broad-based selling. The tech roller coaster was on, as the BSE IT Index lost 5.9 per cent through Thursday to recover 6.8% on Friday. Market dynamics remain unfavourable but receding war possibility can trigger a market rally.

Market slipped further with brisk broad-based selling. It shed 1.6 per cent on the BSE Sensex during the week, it has lost more than 6 per cent since parliament attack and 19.5 per cent during the year 2001. However, on Friday the market gained 53 points led by the technology stocks. Investor skepticism is amply reflected in the 13 per cent fall in combined average turnover at both the exchanges. FIIs and domestic funds too showed weak interest with each investing Rs 17 crore this week.

Stock futures at NSE witnessed a 5.7 per cent rise in average traded contract this week. Satyam Computers remained as the top traded stock future. SEBI's recent decision to allow FIIs to trade in all derivative products subject to the position limit now applicable to trading members should provide the needed boost to the derivatives segment. Till date, FIIs were only allowed to trade in the index futures market. SEBI has also said that physical settlement of both stock options and futures will start from April '01.

The tech roller coaster was on, as the BSE IT Index lost 5.9 per cent through Thursday to recover 6.8% on Friday. Tech heavyweights Infosys and Satyam closed higher but Wipro was lost 2.8%. Old economy stocks remained weak with selling pressure on cement and oil stocks. IBP and Shipping Corporation gained on disinvestment hope. Sterlite Indusries share price gained 16% on its buyback announcement for shares of up to 50% of its paid up capital. With the buyback promoters will be able to raise their stake to 93% from 43%. Most of the second-rung stocks fell as traders squared positions before these stocks move to T+5 rolling settlement, starting Monday. Aztek Software, Mascot Systems and Adlab Films were the major losers. Maars Software's stock price rose (32.3%) as its board approved an issue of GDRs representing 11 million shares.

In economy, the revenue collection for this fiscal improved but still falls short of budgetary target. Till December 22, total direct tax collection was up 0.55% compared to last year but total indirect tax collection up to December 15 this year were 3.75 per cent short as compared to the same period last year. However, it is still better than negative growth of 14.6% registered in the first half of the year. Finance Minister's recent move to increase infrastructure spending will further raise the already bulging fiscal deficit. Looking at the gloomy picture, Fitch Ratings India has estimated that fiscal deficit will exceed the targeted 4.7% of GDP and NCAER has cut short India's growth forecast for this fiscal.

In the US, tech stocks propelled the NASDAQ to gain 2.1 per cent and the Dow Jones Industrial Average climbed 1 per cent for the week

Outlook
Market dynamics remain unfavourable in the current uncertainty and war fears. The markets direction will heavily rest on the emerging border situation. Also, new year will mark the beginning of new trading pattern, as all stocks will come under compulsory rolling settlement on T+5 basis. The market will attain greater safety from this, but it will dampen speculative interest hence a short-term negative. But receding war possibility can trigger a market rally.