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Bears On A Rampage

The BSE Sensex shed 97 points from the previous week's levels while the NSE Nifty lost 25 points. All thanks to the escalating border tensions. Auto, cement, energy, even technology sectors, all took a severe beating. The only bright spot though was the FIIs. The latter bought equities worth Rs 93 crore.

The bears had a blast this week. They were calling the shots, whoops! the prices! The BSE Sensex shed 97 points (2.84%) from the previous week's levels while Nifty lost 25 points (2.30%). Continuing to cast its ugly shadow over the markets were the usual Gujarat riots and the gilt scam. If that wasn't enough, terrorists struck in Jammu. And obviously inviting the government's wrath was our not-so-friendly neighbour, Pakistan. And there it was, the markets nose-dived, bears took charge. Anticipating a war between the two countries, the bulls stayed at the fringes, dragging the markets down. But that wasn't the case at the start of the week when markets opened for trading. Cyclical stocks gained marginally till the middle of the week but were hammered subsequently. The reasons: postponement of IPCL divestment, war fears looming large, the possible delay in disinvestment of HPCL and BPCL, and profit booking in the initial gainers -- auto and cement stocks.

Amidst all the mess, FIIs got active scouting around for good bargains at low levels. They bought equities worth Rs 93 crore. With net investments in May standing at Rs 246 crore against Rs 83 crore in first 17 days of April, the going has been good so far. However, domestic investors continued to be sellers, offloading equities worth Rs 91 crore.

The attention grabbers this week though was cement and auto stocks. Amongst the latter, a good performance posted by the two-wheeler major, Bajaj Auto (net profits were up a whopping 98%) saw auto stocks do well. For the former, it was expectations of a rise in cement prices, which worked in its favour. However, PSU stocks, particularly, energy stocks had an okay stint. While the government's decision to exit completely from India's largest automobile company, Maruti, was a welcome move, the much-awaited IPCL sell-off was pushed to Saturday. The reason: valuation glitches and heavy lobbying for and against Reliance Industries picking up IPCL. After having lost the IBP disinvestment race to IOC, the largest company by market cap merged its refinery arm, Reliance Petroleum, to emerge as the largest private player in the oil sector. According to market hearsay, Reliance has made the highest bid for IPCL. By the time we are through with the events this week, the verdict may be out and it will be no surprise if Reliance grabs IPCL. However, the initial euphoria about IPCL, and the subsequent rise of PSU stocks, didn't prevent BPCL and HPCL from losing ground on Friday following a report by the Parliamentary panel that government may defer their privatisation.

As for the new economy stocks, the US tech stocks gained 80 points during the week, with noticeable triggers coming from Dell Computers' better-than-expected first quarter sales. However, the BSE Tech Index shed about 49 points (3%) during the week.

Despite hordes of obstacles, the government did manage to do some business. The Patents bill, the amendments to the insurance bill were finally passed in the Parliament. Pharma MNCs, however, were peeved about a particular regulation in the bill, which says that the government may overide patent protection given to drug manufacturers in case of an emergency. The domestic majors, on the other hand, will have to up their original drug research, ahead of the product patents regime in 2005. As for the stockmarkets, they are showing a relatively high appetite for domestic drug majors, but today's favourites may not be so post-2005.

The two index heavyweights, Reliance Industries and Reliance Petro, which account for 16% of the Sensex's market cap will be the initial triggers for the market, should the conglomerate manage to get IPCL. A mild rally in the next disinvestment targets HPCL and BPCL is also expected. Overall, a bear trend is likely to prevail till border tensions ease. FII buying, however, should losen the bear grip somewhat.