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Hope Floats

Down 219 points, up 141 points, net loss: 78 points, that sums up the movement of the Sensex during the week. Bears ruled the roost across the board, but bulls finally took centre stage. But for how long?

Boy! what a week that was. The stockmarkets hit a six-month low on Thursday. Gold prices zoomed to a seven-year high. Over Rs 40,000 crore worth of market cap was wiped off instantly. All this found root in the prime minister's pledge for a decisive action (read: war) against Pakistan. A mini-war has been on anyway on the borders. Come Thursday, PM Atal Bihari Vajpayee announces 'there are no war clouds'. Come Friday, markets bounce back. The war paranoia saw the Sensex lose 219 points in four sessions. However, Vajpayee-rhetoric saw bulls take centrestage. The result: the Sensex rose by 141 points in the last session. In all, the Sensex was down 78 points (-2.34%) from the last week's level, while Nifty lost 23 points (-2.16%). Strikingly, war apprehensions saw the foreign institutional investors turn sellers. The FIIs sold equities worth Rs 88.5 crore while the domestic FIs indulged in heavy bargain buying (thanks to lower valuations), picking up equities worth about Rs 135 crore.

But for all this, markets ideally should have started on a positive note with IPCL disinvestment. The government finally sold its 26% stake in IPCL to Reliance Industries for Rs 1491 crore. However, border tensions coupled with the fact that Reliance group's plants in Jamnagar could be hit in the event of a war saw the two-index heavyweights -- Reliance Industries and Reliance Petroleum –loose an average 9% till Thursday, but were up 6% on Friday. Another index heavyweight ITC, on the announcement of its results on Wednesday, saw the stock price move up, but then it fell. For the quarter-ended March 31, 2002, cigarette major's profits were up 7% on a year-on-year basis but its sales were down 8% -- largely due to the excise hike in the last budget -- over the previous year. Thus, the stock felt some heat on Thursday before making a recovery on Friday. It wasn't just index stocks that were in the bear grip others suffered too. Falling valuations further forced the brokers to sell stocks of the clients who weren't able to pay additional margins for their long positions. Interestingly, last week, SEBI removed the 10% price band for 53 stocks. But during the week, it reinstated it to counter volatile markets. Ironically, the price band was introduced in September 2001, when the Sensex had dived to its 8-year low, following the US attacks. The circuit filter means that trading in stocks, which move over 10% either ways, is frozen. The absence of these filters could see market prices go down further.

Coming back to the last trading day, the Sensex went up by 141 points thanks mainly to ITC, Reliance and Reliance Petroleum. Even 3 top-tier tech stocks – Infosys, Wipro and Satyam -- after being battered for a while, contributed to the Sensex's rise. The surge here is partially attributed to marginal gains made by the otherwise rangebound Nasdaq on Thursday. On the other hand, the Dow Index fell 248 points (2%) this week on rumours of fresh terror attacks in the US.

Outlook The softening of stance on the issue of going to war with Pakistan saw the market turn bullish on Friday. This was more of a correction in valuations, which dropped over the week. But till war clouds loom large on the stockmarket, it will continue to be rangebound. Among the core sectors that registered a growth in April, the cement sector fared rather well. Hence, cement stocks are expected to be in limelight in the near future.