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A Volatile Week

In a volatile week, the Sensex ended with losses of 3.13 per cent. In spite of the disinvestment minister's talking up the markets towards the end of the week, PSU shares were the biggest losers.

It was a volatile week in which the Sensex gained or lost more than 100 points on three of the five trading sessions. Bad days outnumbered good ones and the net result was that the Sensex closed the week down 3.13 per cent at 5667 points. The Nifty fared slightly better with losses of 2.83 per cent to end at 1800 points. Losses were evenly spread out with the S&P CNX 500 and CNX Midcap 200 losing 3.47 and 3.18 per cent respectively.

FIIs were in retreat mode generating net outflows of Rs 139.4 crore. Mutual funds were, however, net buyers to the extent of Rs 28.13 crore till Thursday. Daily average trading volumes across both exchanges fell to Rs 8,109.27 crore. This was 6.64 per cent less than that recorded in previous week. Thus there was no sharp fall in volumes on account of liquidity being redirected to PSU IPOs. In spite of gains on some trading sessions, breadth indicators remained negative throughout the week on both exchanges.

The Sensex opened the week in poor form losing 152 points on Monday. There was much apprehension that the IPOs of IBP, CMC, GAIL, Dredging Corporation and Bank of Maharashtra would suck out liquidity from the markets. This may have turned out to be a self-fulfilling prophecy as volumes have remained in line with the trend of the previous weeks. Nonetheless, there was weakness in key index stocks like Reliance and SBI. The offer of a discount for retail investors in these IPOs did not improve sentiment at these counters. GAIL, IPCL, IBP and CMC fell by 7.2 per cent, 4.7 per cent, 3.4 per cent and 2.2 per cent respectively. The fall was, however across the board with automobile as well as cement stocks firmly in negative territory.

After small gains on Tuesday the bears once again scored a comprehensive victory, dragging the Sensex down by 116.29 points on Wednesday. The disinvestment minister's comments on the lukewarm response to the IBP offer and the presence of a bear cartel vitiated the atmosphere. The unwinding of positions in the F&O segment also contributed to the turmoil. PSU stocks were once again hammered with the BSE PSU index shedding 137 points (2 per cent). Dredging Corporation led the fall closing lower by 13 per cent. IPCL and IBP also entered negative territory with losses of 2 and 2.5 per cent respectively. CMC, however, bucked the trend with gains of 2.7 per cent.

The Arun Shourie effect was visible on Thursday as PSU stocks remained afloat while the market lost one per cent. The trend reversed on the last trading session as gains were spread across the gamut of sectors. PSU stocks, shone the brightest with the BSE PSU index rising by 2 per cent on Friday.

Despite the recovery towards the end of the week, all sectoral indices closed lower over previous week. The sharpest fall was seen in the BSE PSU and BSE Bankex, which fell by 4.59 and 3.9 per cent respectively. The BSE Healthcare, BSE IT and BSE FMCG indices also shared the pain with losses of 1.93 per cent, 1.71 per cent and 1.86 per cent respectively.

With the biggest public issue of them all—ONGC—slated for the next week, markets are in wait-and-watch mode. The comfortable oversubscription of all PSU issues should, however, give comfort to the market.