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Succumbing Towards The End

After two weeks of modest gains stock markets moved southwards. Technology stocks fell on account of disappointing earnings while there was across-the-board profit-booking in banking stocks in the last trading session.

Stock markets took a beating this week on account of heavy selling pressure in technology stocks. While the BSE Sensex fell 2.4 per cent, the S&P Nifty was down 2.8 per cent.

The week started on a disappointing note for IT stocks. Selling pressure started after Q3 results of Satyam and HCL Technology fell short of market expectations. HCL Technologies' net profits shed 36 per cent and Satyam's earnings fell by 2.25 per cent over the corresponding period last year. Shares of frontline technology companies took a hit too, with Infosys falling by 5.23 per cent and Wipro losing 6.8 per cent over the week. As a result, the BSE IT index ended the week down 7.5 per cent.

The rally in banking and steel stocks continued this week too. Canara Bank and Corporation Bank posted impressive quarterly results. These banks reported earnings rise of 82.6 per cent and 66 per cent, respectively. During mid-week there was some selling pressure in larger banks. By Friday, this had spread across the banking sector and profit-booking was reported in nearly all banking counters.

While correction was evident in banking stocks, steel companies continued to rally in anticipation of positive quarterly results. The country's biggest private sector steel maker, TISCO, posted a quarterly profit of Rs 2.8 billion, a seven-fold increase over the same period last year. Another Tata company, TELCO, registered a profit of Rs 75 crore as against a loss of Rs 55 crore in the corresponding period last fiscal.

By the middle of the week, the Sensex had recovered half of the losses it made on Monday. There was some optimism by now. PSU stocks also saw some renewed buying interest on reports that the attorney general had given the go-ahead for HPCL/BPCL divestment without referring the matter to Parliament. HPCL ended the week up 1.4 per cent. As compared to this cigarette maker ITC, which has around 6 per cent weightage in the Sensex, fell on account of fears that cigarette may attract higher excise duty in the budget. The stock was down 3.87 per cent for the week.

All these factors saw the Sensex lose 69 points in the last two trading sessions. Institutional buying also did not help the markets much. FII net inflows stood at only Rs 166 crore as compared to Rs 536 crore last week. The total net inflows from FIIs for the month of January touched Rs 716 crore. But mutual funds dumped equities worth Rs 126 crore. Overall, the sentiments remained negative, pulling the markets down.

Internationally, the Nasdaq fell by 2.4 per cent and Dow Jones Index moved sharply southwards, down 5.3 per cent.

Outlook
The Life Insurance Corporation plans to invest nearly Rs 2,000 crore into the equities markets by March. A large portion of this may be through private deals. But any buying from the secondary markets is likely to have a positive impact. Overall, the outlook remains cautious on account of rising tensions in the Gulf region.