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Equities Jittery

Software companies scaled new 52-week highs with impressive performance, but the story wasn't the same for manufacturing companies. Mid-caps underperformed large-caps.

After rallying for two straight weeks, the equity markets corrected marginally this week. The BSE Sensex declined 1.56 per cent while the Nifty lost 1.38 per cent. The broad market declined a little more with the S&P CNX 500 falling 1.69 per cent. Mid-caps, which have had a great year, lost more ground. The CNX Midcap 200 lost 2.52 per cent.

The trading week was curtailed with a holiday on Wednesday on account of the assembly polls in Maharashtra. The markets lost ground on the first two trading sessions and gained some of it in the last two days.

Most of the action revolved around the results of technology companies. On Monday, Mphasis BFL announced its result, which was not up to market expectations, but the tide turned on Tuesday when Infosys announced a 49 per cent increase in net profit for the second quarter. The next day, TCS saw its net profit rise by 52 per cent. Wipro's net profit rose 79 per cent for the second quarter on Friday. Metal stocks saw a sell-off on Thursday due to weak metal prices in international markets.

The BSE IT Index gained 2.72 per cent over previous week, and without this boost, the Sensex and Nifty would have declined a lot more. Among other sectoral indices, the BSE FMCG Index fell the least -- a 0.76 per cent decline. Even the generally defensive pharma companies could not withstand the overall mood, losing 1.29 per cent. The BSE PSU Index fell 1.43 per cent as bank and metal stocks were battered. The BSE Bankex fell 3.35 per cent as the yields on government securities kept rising, which will put pressure on the profitability of banks.

Among other major events of the week was the National thermal Power Corporation IPO, the first divestment after the present government came to power, was oversubscribed over 11 times. Auto ancillary company Sona Koyo Steering acquired a 21 per cent stake in Fuji Autotech for 5 million euros.

Combined average volumes fell by over 16 per cent on both exchanges. FIIs pumped in Rs 410.6 crore in the four trading days. Mutual funds continue to pull money out from the stock market, withdrawing Rs 256.3 crore till Thursday. In global markets, both the Dow Jones and the NASDAQ declined marginally.

The equity market seems to be on the edge as the half yearly results are under way. If the performance of the manufacturing sector lives up to the expectation and more, then we will see a fresh rally. Higher crude oil prices will have an impact on several industries. Moreover, the decline in metals in the international market has already impacted Indian metal stocks. This week a lot of the big names will announce their results.