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Bear's Day Out

The stock markets were in turmoil for the second consecutive week. Unlike previous week, mid-cap stocks joined the list of losers and the Supreme Court ruling took the sheen off the PSU stocks.

The stock markets got a hammering for the second consecutive week as bears came out in full strength to shun PSU stocks. And despite bargain buying on two trading sessions, the BSE Sensex shed 2.06 per cent, while S&P CNX Nifty was pounded by 3.64 per cent over the week. This time even the mid-cap stocks were not spared as CNX Mid Cap 200 Index declined by 4 per cent. With average trading volumes as high as last week's Rs 6,992 crore, the number of declining shares outpaced the number of advancing shares as the advance-decline ratio was negative.

The halting of disinvestment of two oil majors after the Supreme Court ruling didn't seem to dither the confidence of foreign institutional investors in the Indian growth story. Though at a slower pace, they continued to pour in Rs 727 crore over the week. During September so far, FIIs have poured in Rs 2,953 crore—much higher than the net inflow of the past three months. On the contrary, the domestic mutual funds sold equities worth Rs 195 crore over the week.

Continuing with the previous week's bearish sentiment, the stock markets started this week on a jittery note—the Sensex and the Nifty lost 2.60 per cent and 3.12 per cent respectively on Monday. The dismal first-quarter result of HCL Technologies was another big blow--the stock tumbled 17 per cent on a flat revenue growth and a decline in operating margins. Fortunately, this did not lead to any heavy selling in the sector, as the BSE IT Index though gained marginally, was the only winner among sectoral indices.

The Supreme Court ruling on Tuesday restrained the government from privatising HPCL and BPCL without a parliamentary approval. The immediate target – HPCL, for which due diligence had also started, shed nearly 18 per cent over the week, while BPCL lost 8 per cent. The judgement that all PSUs, which were formed by the Act of Parliament, will need parliamentary approval for disinvestment spread gloom over the disinvestment of other PSUs also. The BSE PSU was the biggest loser over the week as it shed 12 per cent. National Fertilisers and Rashtriya Chemicals (RCF) got a severe battering – down 38 per cent and 26 per cent respectively.

Though bargain buying saw the broader markets gain on Tuesday, the gains could not sustain. The expiry of futures contracts on September 25 was also believed to have ignited the selling pressure. Nonetheless, the buying emerged towards the fag end of the week, but was not strong enough to recoup earlier losses. After technology and PSUs, bank stocks were next in the firing lane as BSE Bankex lost 4 per cent, followed by 3.76 per cent drop in BSE Healthcare Index. The sell-off streak in FMCG stocks came down as the BSE FMCG Index shed 1.80 per cent against the previous week's loss of 3 per cent.

The markets have ended down for the second consecutive week with high volatility. But the buying sentiment, which emerged last week, is an indicator that the long-term trend could remain bullish.