A lot of lose talk

In the week gone by, markets behaved as expected. The rally did come on Tuesday and continued to Wednesday, but gave up all the gains on Thursday and finally closed marginally down at the end of the week. What was disturbing was the extent of losses suffered by the midcap and smallcap indices.

The week saw the BSE SENSEX losing 16.62 points or 0.09 per cent to close at 19,468.15 points. The NIFTY lost 16.10 points or 0.27 per cent to close at 5,887.40 points. The broader market lost more with the BSE100, BSE200 and BSE500 losing 0.59 per cent, 0.71 per cent and 0.84 per cent respectively. The BSE MIDCAP and BSE SMALLCAP were even bigger losers with losses of 1.91 per cent and 3.73 per cent.

Gainer
The BSE PSU was the biggest gainer up 0.34 per cent. The other gainers included BSE HEALTH up 0.32 per cent and BSE BANKEX up 0.31 per cent. The losers included BSE REALTY down 5.39 per cent, BSE CAP down 3.98 per cent and BSE METAL down 1.61 per cent. In individual stocks, Tata Motors was up 6.48 per cent, Jet Airways up 4.51 per cent and Coal India up 3.10 per cent. The losers included Maruti Suzuki down 7.24 per cent, IFCI down 11.00 per cent and LIC Housing Finance down 6.85 per cent. With this, the week's pronounced fall in the midcap and smallcap indices where the midcap is down over 7 per cent for the year and 10.35 per cent from a high made on January 9. The smallcap has performed even worse being down over 835 points or 11.35 per cent from the year's beginning while it is down 15 per cent from the year's high of January 9.

Discouraging
Economic news during the week was not too encouraging with IIP (industrial production) numbers for December being negative at 0.6 per cent, which makes this the third negative in the last four months. Considering the row over the GDP numbers between the CSO and the Finance Ministry in the light of these numbers, it appears that the CSO would be more on target. Inflation numbers for January were moderated downward and were at 6.6 per cent against 7.2 per cent, in the previous month giving hope that RBI may cut interest rates going forward. The Indian rupee depreciated against the US dollar from Rs 53.50 to Rs 54.22, a fall of 1.35 per cent.

Scandal
There was yet another scandal, which has hit the government this time in the form of purchase of VVIP, helicopters. The deal concerns a payoff and would put pressure on the government when the Budget Session begins this Thursday, February 21. It is most unfortunate that whenever the Parliament Session is to begin, there is some issue, which rocks it and does not allow the session to carry on smoothly. FIIs continued to be buyers of equity in the Indian market and their net purchases were Rs 2,567 crore while domestic institutions were net sellers of a mere Rs 227 crore.

There is a marked slowdown in the selling of domestic institutions and also that seen in the buying of FIIs, which used to average Rs 1,000 crore per day. There is no reason to believe that the optimism of the FIIs has disappeared. Concern however remains about the fact that with just nine trading sessions to go before the last budget to be presented by the present government, it would be difficult to assess what would happen in the budget. The FM on his road show has assured the FIIs that the budget would not be populist and would have a stable tax regime. The economy is in poor shape and party politics mandates that there be vote-catching policies introduced in the budget, which would be a 'Catch 22' situation for the FM. I am sure it would be a real tightrope walk for the FM.

Issue
The issue from Sai Silk opened and received excellent response from retail investors who subscribed their portion 1.31 times. Lack of support from the QIBs and HNIs saw the overall subscription level drop to 0.87 times and the management in consultation with the lead managers decided to withdraw the issue. It is indeed sad that a company in the retail business and offering a safety net to original
retail investors had to finally come to zero.

The budget is likely to see some sops for the common man with the tax-free limit being increased from the present Rs 2 lakh to maybe Rs 2.6 lakh, or considering the elections next year to Rs 3 lakh. The deduction on housing loan repayments set off is likely to be raised as they have remained unchanged for the last 12 years. With the economy being where it is, the possibility of raising revenues from an across the board excise duty raise looks unlikely, limiting the options for the FM.

Drift
The markets in the coming week do not hold much promise and are likely to drift. The BSE SENSEX has support at 19,395 points, then at 19,321 points, then at 19,264 points and finally at 19,149 points. It has resistance at 19,526 points, then at 19,666 points, then at 19,723 points and finally at 19,902 points. The NSE NIFTY has support at 5,860 points, then at 5,823 points, then at 5,788 points and finally at 5,718 points. It has resistance at 5,906 points, then at 5,953 points, then at 6,007 points and finally at 6,068 points.

227
crore. The amount that domestic institutions were net sellers ofu00a0