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Outlook Positive but Budget-Controlled

Investors remain bullish on the economy but cautious about the markets ahead of Union Budget 2004.

The equity markets were characterised by large intra-day swings and most investors remained cautious. However, the gains registered during three successive surges starting previous week were not lost signifying that investors had high expectations from the Union Budget to be presented next Thursday. Even the FIIs remained net buyers.

The positive gains registered on Monday and Thursday, tempered to an extent by the losses suffered on Wednesday, were enough to take the BSE Sensex up by 2.4 per cent and the S&P CNX Nifty by 3.2 per cent. The broader indices further strengthened the belief that the gain was spread across the market with the S&P CNX 500 gaining 3.7 per cent and the CNX Mid Cap 200 up a whopping 5 per cent.

Trading volumes too were substantial with average turnover for the week at Rs 5839 crore up by 3.1 per cent. The ratio of advances-declines remained above 1 for the whole of the week suggesting that gainers continued to outnumber the losers throughout the week. It was close to 3.37 on Monday pointing to the bullish sentiment that had spilled over from last week's close but by the end of the week, it had declined to 1.1 reflecting the cautiousness that is customary before any Union Budget. Both FIIs and mutual funds were net buyers at Rs 25.5 crore and Rs 122.7 crore respectively.

Among sectoral indices, the BSE IT Index was up 2 per cent riding on the back of a merry Monday when tech stocks registered substantial gains. The BSE Healthcare Index too was up 2.93 per cent with select pharma shares coming back in the reckoning after a correction earlier. The main gainers were Cipla, Dr Reddy's and Ranbaxy. The BSE FMCG Index too piggy-backed on a favourable market sentiment and moved up by more than 2 per cent. The BSE PSU Index was the biggest gainer, rising 5.4 per cent. The star-performers were BHEL, ONGC and SCI all of which gained substantially. The BSE Bankex too was up by 1.6 per cent as a result of sustained buying interest in SBI, PNB, ICICI Bank and HDFC Bank, all of which had tumbled earlier when banking stocks had taken a beating.

In the US, an upward mid-week trend in the Dow Jones and the NASDAQ was reversed by the end of the week as the US Labor Department came up with news that US employers had added fewer than expected jobs suggesting that the economic recovery might not be as robust as had been anticipated earlier. Accordingly, both the DJIA and the NASDAQ shed about 0.9 per cent each.

The ball is in Mr P Chidambaram's court and it remains to be seen whether he serves up an ace or a double fault. The faint-hearted would do well to steer clear of the markets on Thursday but if our FM lives up to the market's expectations, then a sustained bull run could be in the offing. Investors will continue to remain cautious in the first three days next week. What happens on Thursday and Friday will depend on the Budget.