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Weak, But Not Really Down

The impact of gilts scam wasn't much though but it did manage to dampen market sentiments somewhat. The BSE Sensex went up by a mere 50 points and the Nifty by about 19 points

The Home Trade monster didn't dampen the positive spirit of the markets when they opened for trading. In fact, technology and PSU stocks and some activity in index heavyweights lifted the broader indices in every trading session. The negative sentiment, however, created by gilts scam rubbed off on the Sensex in the last session. The Sensex ended the week just 50 points (1.50%) higher than the previous week. Nifty went up a mere 19 points (1.77%). It was heartening to see the foreign institutional investors returning to the markets, for a change to 'buy' instead of 'sell', which was the trend for some time now. The FIIs bought Rs 145 crore of equities as against last week's net sales of Rs 38 crore. However, domestic financial institutions continued to be on a selling spree, pulling out Rs 135 crore from the markets.

Just like last week, PSU stocks continued its roller-coaster ride, particularly energy and petrochem stocks, which went up and down as investors booked profits to take positions in key technology stocks which moved in tandem with their US peers. In the US, Nasdaq lost 15 points this week. The high-point in the week was the Index going up by 122 points piggybacking on Cisco's announcement of better revenue prospects. However, it continued its downward journey, fuelled further by Moody's downgrading a telecom major. At home, both top-tier and select second-rung IT stocks witnessed buying interest. Hence, BSE IT Index raked in a 2.62% gain over the week and technology funds were up 2%.

However, by the end of the week, Home Trade had caught on with the markets. Indeed, the NCAER-ET survey points out towards an improvement in the business confidence index, but what about 'demand creators', a.k.a. the investor, whose confidence is being put to test time and again. If it was Ketan Parikh-crafted stock scam which tainted co-operative banks last year, this time it's the rogue g-sec deals which have put a big question mark on the former's credibility. This, in turn, plays havoc with the lives, and the money, of small investors. Each day a new co-op bank is going bust. As usual, the problem lies in the regulations, which opportunists use to their advantage to swindle public money. The result: a scam is born. It will be no surprise, if in the near future, we see the central bank introducing another set of regulations to plug the loopholes. For instance, it is already contemplating imposing a ban on physical delivery of government securities. All this is fine, but what is so upsetting is that our regulatory framework is so fragile that it has to wait for scams to happen to amend rules.

Outlook
No wild guesses on which stocks will go up and down, but one thing is certain what could improve the market mood will be PSU disinvestment and political developments. Already, the ET-NCAER's business confidence survey is indicating improved business sentiments. The confidence index rose for the second consecutive month, though it points towards a grim domestic sales outlook but sounds optimistic about the growth in employment opportunities. So, let's wait and watch.