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Stocks Take A Hit

Equity markets reached their lowest point in the year to date amidst all round selling. The carnage was widespread as mid-caps were pummeled. FIIs, however, remained net buyers and mutual funds also add to their positions in the week gone by.

There was blood on Dalal street as the bears went on a rampage. The Sensex reached its lowest point in the year and closed at 5443.44 points, down 4.51 per cent (256.96 points). A similar situation prevailed at the NSE, where the S&P CNX Nifty shed 4.81 per cent (87.1 points) to close at 1725.1 points. Mid-caps were at the centre of the carnage with the CNX Midcap 200 Index losing 5.53 per cent.

FIIs, however, continued to repose faith in Indian equities and made net investments of Rs 765.6 crore. Mutual funds were also buyers and till Thursday made net purchases of Rs 237.48 crores. Volumes witnessed a squeeze with daily average turnover falling to Rs 7216.78 crore. This was 9.16 per cent lower than that seen in the previous week. Sentiment continued to remain poor and on the BSE, the advance decline ratio remained under one on all trading days.

The loosing trend of the previous week continued from the first day of the current week under review. Monday saw the Sensex fall by 3.15 per cent (179.74 points). This was the largest single day fall in the index in percentage terms since April 10, 2003 when the index shed 3.37 per cent. Tax considerations on account of the end of the financial year and lack of any immediate trigger were thought to be the main reasons behind the selling pressure on Monday. All index heavy weights were at the centre of the maelstrom. SBI, Reliance Industries, ITC and HLL lost between 2.3 per cent and 3.8 per cent. Steel stocks were severely impacted due to the governments move to withdraw some of the export benefits available to the industry. SAIL, TISCO and Jindal Iron lost 10.39 per cent, 7.86 per cent and 9.14 per cent respectively. Automobiles stocks also took a severe beating on concerns that Honda Motors' direct entry into the Indian market would put pressure on the existing players. Hero Honda thus fell by 5 per cent while Bajaj Auto ended 2.6 per cent lower at Rs 450.

Markets remained listless in the aftermath of this storm and Tuesday and Wednesday were sedate with the Sensex moving in a narrow range. This was, however, just the lull before the next installment of the storm and the Sensex shed 120.75 points on Thursday. Reliance Industries and SBI shed 4 per cent and 3.5 per cent respectively and were the major losers among index heavyweights. IT shares also saw drifted lower and Infosys, Satyam and Wipro were all in the red. For every one stock which gained there were three losers on the BSE.

Trading interest was subdued on Friday and both exchanges saw a combined turnover of Rs 6513.88 crore. Amidst this light trading the Sensex gained 28 points.

Over the course of the week pharma stocks were the worst affected with losses on all trading days. Naturally the BSE Healthcare Index was the biggest loser shedding. HLLs continual weakness with nervousness on the ITC counter saw the BSE FMCG Index lose 5.43 per cent. Relatively speaking IT stocks had the best outing among the BSE sectoral indices and the BSE IT index shed 1.84 per cent.

In US markets the tech laden NASDAQ shed 2.23 per cent, while the Dow Jones Industrial Average fell 0.52 per cent.

Outlook
Markets have corrected substantially over the past two weeks. The next trigger should appear in the form of the earnings season, which is around the corner. As always we suggest a long-term perspective while contemplating equity investing.