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Will Pre-Budget Euphoria Prevail?

Frontline technology stocks along with index heavyweights took the stock markets southwards. PSU banking stocks were also at the receiving end on concerns about erosion in their gilt portfolios.

The Indian stock markets closed the week on a weaker note. The BSE Sensex fell by 1.72 per cent and the broader Nifty was down 1.92 per cent over the week. The technology heavyweights were largely responsible for this loss. As compared to this, both the Nasdaq and the Dow Jones finally showed some correction after four weeks of continuous fall. The Nasdaq gained 2.15 per cent and the Dow was up 0.56 per cent over the week. Much of this recovery happened on the last trading day of the week as the report of the UN weapons inspectors did not in categorical terms state that Iraq was in 'material breach' of the UN resolutions.

The FIIs were net sellers in the week gone by. This resulted in an outflow of nearly Rs 100 crore. In fact, selling was evident every day indicating the weakening sentiment. Mutual funds too pulled out money on a daily basis leading to an outflow of Rs 66 crore by the middle of the week.

All frontline technology stocks such as Wipro, Satyam and Infosys took a major beating. However, the worst affected was Infosys. The stock lost a massive 7.2 per cent in the week, pulling the BSE IT index down by 5 per cent. This was on account of the news that more US states were contemplating blocking offshore government BPO work to India. Meanwhile, Infy also decided to defer its proposal of ADR issue due to weak sentiments and war concerns. I-Flex, which had slipped in the earlier trading sessions, gained 2.5 per cent on the last day. The stock rose nearly by a per cent for the week, on reports that financial major, Citigroup, had awarded a $200-million contract to the company. This contract is believed to be the largest software project awarded to an Indian software company till date. Aptech too posted gains for the week following the news that SSI had acquired a substantial stake in the company.

Banking stocks saw major activity during the week. These stocks have fallen continuously through the week on concerns over rising yields hurting banks' gilt holdings. Among PSU banks, SBI largely held its ground. The SEBI's statement that FIIs position in derivatives will not be considered while calculating the FII-exposure limit improved sentiments. Private sector banks such as HDFC Bank and ICICI Bank saw increased buying activity towards the end of the week.

Disinvestment-led stocks HPCL and BPCL were gainers for the week. While HPCL was up 3.6 per cent, BPCL gained 1.4 per cent. BPCL will go through the initial public offer route for the disinvestment process soon. The story, however, was different for pharma stocks. Heavyweights Ranbaxy and Cipla lost 0.6 and 4.6 per cent, respectively, through the week. The BSE Healthcare shed 2.25 per cent for the week.

Outlook
With no consensus being arrived at the UN Security Council fears of an imminent war seem to have subsided. It remains to be seen whether there is an improvement in sentiment in the few sessions before the Budget. Stock markets could take a cue from the end of the week recovery on the Nasdaq and the Dow.