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Glide and Slide

The alternate bouts of ups and down continued to haunt the markets over the past week as uncertainty about the new government's economic policies continued to cloud the market sentiment.

Indian stock markets lost the initial momentum and declined over the past week. After registering steady gains on the back of renewed market confidence, a broad-based slide hit the markets on Friday, denting the initial gains. Over the week, the BSE Sensex fell 1.15 per cent (or 56 points) to close at 4833 points. The S&P CNX Nifty was down 0.83 per cent to close at 1508 points. The broader indices were also hit by Friday's slide. The S&P CNX 500 lost 0.19 per cent over the week. However, the CNX Midcap 200 was up 1.37 per cent.

Foreign institutional investors continued returning to the market after a big May sell-off on concerns about economic reforms under the new left-backed government. They pumped in Rs 165 crore over the past week. Mutual funds also reversed their selling streak and turned net buyers to the tune of Rs 24 crore. Cautiousness ahead of the Budget led to muted volumes as the combined average turnover for the week fell to Rs 5,244 crore, down 11.94 per cent from last week.

The markets started the week on a positive note amid a lacklustre trading environment. Stocks rose cautiously as investors awaited clearer signals on the new government's Budget and the vital monsoon rains. Steady regional markets and continued inflow of foreign funds improved investor sentiment as the market registered three days of uninterrupted gains followed by a marginal fall on Thursday. But the bears dominated on Friday as the Sensex slumped 2.3 per cent. The possible impact of a likely reduction in custom duties on crude oil and petroleum products took its toll on the market. The filing of prospectus for TCS's public offer pulled down tech stocks.

Among the sectoral indices, the BSE Banking Index was the biggest loser, shedding 2.8 per cent over the week. PSU banks were at the receiving end of the market's wrath, after a leading foreign brokerage firm downgraded the PSU banking sector. The BSE PSU Index also lost 0.41 per cent as state-run oil companies fell sharply on Friday following reports that custom duties on crude oil may be pared. Among other losers were the BSE IT and BSE FMCG indices, shedding 1.05 and 1.3 per cent respectively. However, the BSE Healthcare Index bucked the trend and ended the week in black, registering a marginal gain of 0.8 per cent.

Global indices gained steadily over the past week, perked up by a recovery in the US economy. The prospect of an energy crisis also waned in the wake of higher output and declining oil prices. Wall Street shut down on Friday to mark the passing away of former President Ronald Reagan. Over the week, the Dow Jones gained 1.63 per cent to close at 10410 points. NASDAQ also ended the week in black, closing at 2000 points, registering a gain of 1.07 per cent.

Outlook
The markets have been wary of the new left-backed government's economic agenda and therefore, they are likely to stay range-bound and wait to see the new government's maiden Budget, due in the first week of July, for a clearer indication on how far it is willing to go with reforms. Until then, institutional as well as retail investors are likely to stay on the sidelines.