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Finally, Markets Change Direction

Sluggish FII inflows and high crude oil prices paused the four-month-long equity markets' rally. The Sensex slipped in the negative zone after 16 weeks

Sluggish FII inflows and high crude oil prices paused the four-month-long equity markets' rally in the week ended August 26, 2005. The Sensex slipped in the negative zone after 16 weeks to close at 7,680, down 1.29 per cent over the week. The Nifty followed with a loss of 1.11 per cent. Among the broader indices, S&P CNX 500 dipped 1.02 per cent, while CNX Midcap lost 0.59 per cent.

Strong negative sentiments prevailed throughout the week. When trading started on Monday it seemed as if another milestone would be achieved this week. Maintaining a lead during the first half, equity markets slipped in the red after the afternoon session. Overall, the mood was cautious amid heavy selling pressure and depression in the global markets. At the end of trading on Monday, while the Sensex closed 30 points down at 7,751, the Nifty slipped 16 points to end the day at 2,368 mark. Banking stocks continued to suffer on Monday as well. PSU and FMCG stocks too felt the pressure. Select pharma and IT stocks, though, attracted some buying interest.

Equity markets had a free fall on Tuesday. The Sensex skidded nearly 135 points to end the day at 7,616. The Nifty too lost 42 points to close at 2,326 mark. Sentiments remained subdued throughout the day. Selling across sectors dragged the markets down. The fall was led by healthcare and banking counters. PSU and IT stocks too lost heavily. Select FMCG stocks also were at the receiving end, though ITC ended the day in the positive territory.

After a choppy session, equity markets ended flat on Wednesday. The Sensex dipped to an intra-day low of 7,537 points but managed to recover later in the day. The index closed at 7,612 points, down four points from its Tuesday's close. The Nifty too touched a low of 2,300 points but came back to end the day at 2,322.50 mark. The overall market sentiments remained negative due to the slowdown in the FII inflows in the last few trading sessions. Under pressure for the last few days, banking stocks gained some ground on Wednesday.

After three days of weakness, equity markets gained some strength on Thursday. However, this came with alternate bouts of heavy selling and buying. At the end of the day, the 30-stock BSE Sensex closed up 0.64 per cent at 7,760.42. The Nifty too added 1.38 per cent to end the day at 2,354.55 mark. Mid-cap stocks too saw substantial interest on Thursday. PSU, pharma, FMCG and IT stocks boosted the market sentiments. Banking stocks, though, continued their poor run.

Bouts of volatility troubled the equity investors on Friday. After the initial spurt, markets suffered during the afternoon session but did well to stage a comeback towards the end of the day. The Sensex fell to an intra-day low of 7,644 points but ended the day up 20 points at 7,680.22. The Nifty too closed nearly three points up at 2,357.05 mark. Buying interest was seen on IT, FMCG and pharma counters. The day, though, belonged to mid-cap stocks-buying interest pushed the CNX Midcap index up 1.67 per cent.

Banking stocks led the pack of losers on the Sensex. HDFC Bank (-3.29 per cent), ICICI Bank (-3.46 per cent) and State Bank of India (-3.09 per cent) were among the major losers of the week. TCS, NTPC and ITC though gained over the week. Overall, there were seven gainers and 23 Sensex losers in the week.

Among the sectoral indices, banking stocks continued their poor performances. The BSE Bankex slipped in the negative zone for the fourth straight week with a loss of 2.94 per cent. Metal stocks too looked dull. The BSE Metal Index slipped 2.51 per cent. PSU, healthcare and select IT stocks too ended the week with losses. BSE FMCG though gained 0.11 per cent.

The combined daily average turnover on both exchanges went down by 4.08 per cent to Rs 9,170 crore.

Foreign institutional investors slowed down their activities in the markets and invested only 189 crore over the week. Domestic mutual funds though pumped in 494 crore.

Outlook

Though we don't see a major correction, volatility is likely to rule the stock markets next week. Slowdown in the FII inflows is a concern. It would be interesting to see how they behave in days to come.