The seven-week long party came to a grinding halt this week. The broader market indices as well as sectoral benchmarks (barring BSE Bankex) nudged lower. While BSE Sensex could contain its losses to 0.78 per cent (28 points), the poor showing by Wipro dragged the Nifty down 1.86 per cent (22 points).
By weekend the sentiment had definitely turned negative as declining issues conclusively outnumbered advancing ones. The advance-declines ratio fell to 0.53 from 0.72 in the previous week. The pace of foreign institutional investor inflows also slowed down considerably. Thus, from Rs 990 crore in previous week, inflows thinned down to a mere Rs 100 crore. Domestic mutual funds, sold equities worth Rs 4 crore in the week ended July 17, 2003.
Led by large-cap bank stocks, and other index heavyweights like Reliance Industries and Dr Reddy's, the stock markets had started their journey on a positive note. The Sensex zoomed up 1.21 per cent on Monday. But the momentum could not be sustained. The rupee's consistent rise against the dollar coupled with poor showing by Mastek and Wipro took away the sheen from technology stocks. For the quarter ended June 30, 2003, both Mastek and Wipro registered a fall in revenues and net profits on a sequential basis. Mastek's pessimistic guidance for coming quarters saw its stock shedding 38 per cent over the week. Even Wipro, despite its optimism, lost 4 per cent. The BSE IT index ended the week with a loss of 5.14 per cent.
Apart from technology, profit booking in Hindustan Lever also contributed to a fall in the indices. The stock, which fell 10.61 per cent, dragged down the BSE FMCG by 5.52 per cent. Besides, the BSE PSU and BSE Healthcare Index also lost 0.91 per cent and 0.35 per cent respectively. The glamour was also missing in the mid-cap segment as CNX Mid Cap 200 Index was down 1.14 per cent. However, the winners of the race were bank stocks as BSE Bankex gained 2.86 per cent.
Heavy buying interest in index heavyweights like Gujarat Ambuja, Tisco and SBI could not stem the Sensex's fall on every trading session.
Even the US markets were in negative territory. Despite an improvement in consumer sentiment about the economic growth and optimistic guidance by Microsoft and other index heavyweights, Dow Jones added up a mere 0.75 per cent (68 points) to its last week's level. Again, despite good performance numbers by Intel and IBM, Nasdaq shed 1.44 per cent over the week.
A Freely Floating Sensex
Come September 2003, BSE Sensex would be converted into a free-float index. This essentially means that it will take into account the market capitalisation of stocks based on the floating stock (shares available for trade held with public), as against the present practice of taking all outstanding shares into account. This way, it would be more transparent, and reflect true liquidity of the stocks. Moreover, a free float Sensex will help FIIs in easier allocation as most global investment benchmark-indices like Morgan Stanley Emerging Market Index give more weightage to companies with higher free float.
Outlook
The market is in correction mode, but the broad market sentiment continues to be bullish on account of good monsoons and healthy FII inflows. The focus of the market is likely to become stock-specific, as more results will be announced in the coming week.
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