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A Week Of High Drama

Stock markets continued to scale new peaks with both Sensex and Nifty closing at their all-time highs. It was a week of high drama with a surprise mini-Budget and good results from Infosys, which kept the mood upbeat

Indian equities continued to churn out gains for the seventh consecutive week in a row. The winning spree was, however, restricted to large-caps. The BSE Sensex and the S&P CNX Nifty gained 1.54 and 1.35 per cent respectively. As compared to this the CNX Midcap 200 index ended the week unchanged. The broader S&P CNX 500 index also gained 1.32 per cent by virtue of its large-cap component.

Trading activity was frenetic and volumes on three days exceeded Rs 10,000 crore and for the week average volumes were at Rs 10,278 crore. This was a 27 per cent gain over the previous week. Declining issues however, held the upper hand on all trading days except Thursday.

FII participation continued on a strong wicket. As in previous weeks, net FII inflows were in excess of Rs 1,000 crore (Rs 1,122 crore in previous week). Mutual funds also continued their buying spree of the previous week injecting Rs 580 crore into Indian equities.

The week began on a sedate note with the Sensex continuing to stay above the 6000-point mark. By Tuesday, a much-anticipated correction seemed to be in progress with the bellwether index shedding 95 points to close at 5943 points. This proved to be short-lived as the index shot up by 151 points to close at a new all-time high of 6108.54 on Thursday. The bullish sentiment was all-pervasive with advances leading declines 8:1 on the NSE and 4:1 on the BSE.

The real fun was, however, yet to start. At closing hours of trade on Thursday, Finance Minister Jaswant Singh announced a slew of excise and customs duty cuts along with proposals to simplify the tax mechanism. Thus, the peak customs duty rate was cut from 25 per cent to 20 per cent. With effect from April 1, 2004, assessees with a taxable income up to Rs 1.5 lakh will not have to file returns. Similarly, pensioners have been exempt from the purview of the one-by-six scheme. Along with other measures, foreign travel tax has been abolished. There is something for everyone and early elections are now a surety.

As expected the Sensex opened the next day with gains of more than 100 points. During intra-day trade, the Sensex touched the 6250 points. And, then there was the most anticipated quarterly results from technology major Infosys. True to form, Infosys did not disappoint. For the quarter ended December 31, 2003, revenue grew by 9 per cent on a sequential basis and rose by 28 per cent on a year-on-year basis. Infosys added 30 new customers and hired 3,666 new employees, which is the highest ever in a quarter.

But the euphoria of all these events was difficult to sustain. Across the board profit booking drove the Sensex down and it closed with gains of just 13 points for the day to close the week at a new all-time high of 6119.59 points.

This see-saw ride left the BSE Healthcare and BSE FMCG Index with losses of 2.25 per cent and 0.30 per cent respectively. The BSE IT index had minor gains of 0.42 per cent.

PSU and Bank stocks were the big winners of the week. The continuation of the disinvestment process even as the government enters election mode was viewed favourably. The BSE PSU Index gained 2.93 per cent. Bank stocks continued to rally on expectations of a hike in the FII investment limit and the BSE Bankex was up 3.95 per cent.

In the US the Nasdaq was in winning mode, notching up a gain of 4 per cent. The Dow Jones was rather quiet, up by 0.47 per cent.

Outlook
The tussle between bulls and bears is on with profit-booking taking place across a range of sectors. FIIs, however, continue to invest strongly in the Indian growth story. Quarterly results from the leading lights of the corporate sector will give direction to markets in the coming weeks.