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Losing Sheen

Though markets made a smart recovery on Friday, it was not enough to overcome the week's earlier losses. Overall, the BSE Sensex closed the week down 1.5 per cent amid low FII participation and profit booking in index heavyweights.

Indian stock markets continued their declining trend for the second straight week. After slipping 2.6 per cent in the previous week, the BSE Sensex fell another 1.5 per cent this week. The S&P CNX Nifty was down 1.41 per cent. Lack of foreign institutional investments and some profit booking in index heavyweights were largely responsible for this weakness in the market.

The bullishness in the mid- and small-cap stocks also dried up this week. The CNX Midcap 200 Index lost 1.2 per cent and the broader S&P CNX 500 Index ended the week down 2 per cent. The trading volume, however, was on the higher side -- the combined average volume at both exchanges rose by 50 per cent this week over last week.

With the year-end approaching, FIIs have started booking profits in the Indian stock market. In three of the five trading sessions, FIIs remained net sellers in the market. Over the week, the net inflow was a paltry Rs 30.7 crore against Rs 870 crore in the previous week. This is the lowest weekly FII inflow since April this year.

Interestingly, domestic mutual funds returned to the market after being net sellers in the last two weeks. They made net purchases of Rs 220 crore this week till Thursday.

Markets opened the week on a bullish note with the BSE Sensex touching a high of 4940.23 points on Monday. But a low FII participation in the subsequent three trading sessions saw the markets falling freely, and BSE Sensex touched a low of 4771.23 points on Thursday. In the last trading session, however, stocks made a smart comeback as market participants found bargains in cement, steel and auto stocks. These stocks were the worst losers in the previous trading sessions. A good FII and mutual fund buying helped the market recover some of the losses incurred in the previous three trading sessions.

Among index stocks, Tata Motors (up 4.67 per cent) and Wipro (up 2.25 per cent) were the major gainers. Cement stocks like Grasim Industries and ACC were on the losing end. In fact, most PSU stocks came under selling pressure this week -- the BSE PSU Index lost 2.81 per cent. This was largely on account of a sharp fall in PSU bank stocks. Canara Bank lost the most (9.5 per cent) and SBI was down 3.5 per cent. Overall, the BSE Bankex closed the week down 2.71 per cent.

Except for technology and FMCG, most of the other sectoral indices closed the week in negative territory. After losing 3.33 per cent in the previous week, the BSE IT Index gained 2.56 per cent this week. Apart from Wipro, the major gainers include Digital Globalsoft (up 9.6 per cent) and HCL Technologies (up 8.9 per cent). Tech shares attracted a bout of buying on the back of improved sentiment for US technology spending.

Outlook
Though the market reacted positively to the revised GDP growth forecast by the government in the previous week, low FII participation spoilt the party last week. In the coming week, market movement will be largely guided by the FII inflows. PSU stocks could come in the limelight as government has advised them to pay interim dividends. The market would also look forward to the government's stance on allowing 74 per cent FDI in private banks.