The BSE Index lost 21 points (-0.50%) while Nifty was up marginally by 9 points (0.81%). The Ayodhya factor, profit booking at old economy Index heavyweights and SEBI's tough stance on interim dividend payouts were the reasons that lead to bearish sentiments. In contrast, the technology stocks ruled firm, as the hopes of US recovery gained fresh grounds.
This week saw a trend reversal in institutional buying. The domestic fund houses turned net sellers to the tune of Rs 198 crore, while foreign fund houses were the value buyers primarily in technology stocks. FII investment for the week was Rs 330.8 crore. However, the corresponding investment in 2001 was a staggering Rs 648.5 crore.
The week started off with profit booking in the key stocks across FMCG, automobiles and diversified sectors as the players got wary of prevailing regional conflicts. The persistent concerns over the fall in cement prices led to weakening in cement stocks. After the budget, a score of companies had announced interim dividend to reward its investors with tax-free income, hoping that they would not be required to give a prior notice of 30 days, as required under the Stock Exchange rules. SEBI laid all hopes to rest by not allowing the bourses to relax the 30-day notice requirement. This resulted in revocation of dividend payouts by companies and hence a negative reaction by the investors.
However, led by the large cap technology stocks, the Sensex jumped 75 points on Thursday. The boost came from a string of positive news from the US markets. A fall in the monthly unemployment figure and strong statement by the Fed chief about an expanding economy lifted Nasdaq and Dow Jones by 7% and 1% respectively. Hopes of recovery in the US economy leading to a higher demand for Indian software services pushed up the BSE IT Index by 200 points, an increase of 12.33 percent.
The technology stocks gained buoyancy almost after eight weeks in the current year. As the funds rotate from old economy towards new economy, the trend may continue for a while. But the future earnings projections, which flow in April, will guide the long-term trend. Meanwhile, political stability will continue to direct the way market moves.