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Firm Bear Grip

S&P downgrade proved nothing beyond a noise. But the derailed disinvestment continues to haunt the market. Market remains weak in the absence of a trigger.

Another depressing week as equities headed south. The BSE Sensex shed 74.6 points (-2.4%) and the NSE Nifty ended the week down 22.4 points (-2.4%). The weakness in US markets, lack of institutional support and deepening disinvestment imbroglio led to a third consecutive weekly fall of Indian bourses. S&P's downgrade of India's domestic currency led to initial hiccups on Friday. But it was largely ignored as the market recovered eventually before close.

The government's view is that the downgrade would only affect our foreign borrowings and not the foreign investments. With 98% of our total borrowing being internal, it is unlikely have a significant impact.

But, following the currency downgrade FIIs sold heavily on Friday. The weekly net-sales figure to Rs 125.5 crore. Domestic funds also remained net-seller for the week offloading Rs 45 crore worth of equities.

The markets already in a strong bear grip, the S&P's downgrade only contributed to it. Except on Tuesday, market fell in all trading sessions. Index heavyweights also faced heavy selling. TELCO lost 3.85%, HLL shed 2.8% and Reliance Industries ended the week down 1.27%.

However, the technology stocks gained initially but they also succumbed to weaknesses in the Wall Street. A series of corporate profit warnings and the tough US stance on Iraq, pulled Nasdaq down 5.4% and the Dow Jones 4% over the week. Back home, BSE IT Index lost relatively less (-1.3%) and the loss was more pronounced in the mid- and small-cap segment. However, the HCL Technologies remained in black (+4%). NSE has notified that HCL Tech and BPCL will replace Asian Paints and P&G as new constituent in S&P CNX Nifty Index. This will be effective from October 28, 2002.

The sell-off in PSU stocks continued this week too, with growing uncertainty over the privatisation program. The stiff opposition to disinvestment in Nalco, Rashtriya Chemicals and National Fertilizer surfaced from the respective administrative ministries. This dragged their prices down. On the positive, 11 companies including 9 foreign companies expressed their interest to buy the stake in Nalco, despite the increasing political opposition on its disinvestment. HPCL and BPCL also lost further ground losing nearly 6% percent.

Among Pharma Stocks, Ranbaxy gained 3% by mid-week as the company received U.S. approval for a generic version of antibiotic Augmentin. The BSE Healthcare Index was down 2% as Dr. Reddy lost heavily, by nearly 7.3 % during the week. Auto and cement stocks also lost their momentum. Last month they reported a robust sales growth. But concern about deficient monsoon impacting sales and the recent hike in diesel and petrol prices was the reason. Bajaj Auto lost 10% and Hero Honda shed 6.43%. ACC lost 4.2% and Gujarat Ambuja was down 2.7%. These stocks were key gainers last week on hopes of price hike and strong demand.

Outlook
S&P downgrade proved nothing beyond a noise. But the delayed disinvestment process and side stories of derailed disinvestment continues to haunt the market. Market remains weak in the absence of a trigger.