The Telegraph
Since 1st March, 1999
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Last Week

I guess contrary to what the famous pink paper proclaimed two weeks ago (Bull run at last), we are not quite seeing snorting rise, are we' If only if it was so easy to call the market turns, journalists would have become full-time punters instead of spreading false notions.

The level of confidence you exude is usually inversely proportional to the accuracy of your calls. The market mercilessly punishes hubris, pride, arrogance. Itís the most efficient leveller Ė the gratification or punishment is instant. With my feet still reluctant to get off the bear camp, let me recount what happened last week. Before the Unit Trust of India (UTI) bailout two weeks ago, the sensex was 3181. Next week it had closed at 3141.

Last week the closing was 3098. The weekly trend is clearly down despite everybody proclaiming that UTIís sales will stop now and the market will start climbing up. We have broken through the close of August 23 (3119), to clearly reverse the rising trend that had started on August 8. This rally lasted for a month ó bit longer than I expected.

The government has once again proved what it means to bet on India. For the entire 2002, the market was sold on the idea of disinvestment. Software business is sluggish, consumer goods companies are facing too much competition and the impact of drought.

The disinvestment story was the one that was keeping the market enthused. The postponement of the disinvestment of BPCL and HPCL has shaken up investors though funds have little choice but to grin and bear it.

However, the overall impact on the market was still muted. If disinvestment is stalled, it not only affects the prices of those stocks (BPCL and HPCL both fell by 25 per cent), but it puts into question the quality of economic governance. The full impact of poor governance is still a few months away but this is what will hit the market hard.

Next yearís budget will incorporate the various sins including the various bailouts the government is generously handing down. We may see rising taxes and reducing purchasing power. Where that will leave corporate earnings' The experts, of course, are confident that the Indian market is a screaming buy.

Beginning today we may see the another down leg spread over 8-10 days, followed by another bounce ó unless we have a terrible new hitting us in which case the fall will be really hard. What happens for the rest of the year' Contrary to popular belief, the last quarter is not such a great time. Since 1994, on six out of eight times, the market ended lower in the December quarter. Hope for the best and stay in cash.

Movement of Indices

       Sensex       BSE 200       BSE 500       S&P CNX Nifty       S&P CNX 500

One year ago       2987.50       311.39       915.84       971.70       632.15

One month ago       3036.40       368.57       1103.36       976.05       721.85

One week ago       3141.11       374.48       1117.56       995.20       730.95

Sept 9       3089.47       368.87       1100.09       998.55       721.20

Sept 10       Closed       Closed       Closed       Closed       Closed

Sept 11       3125.66       368.24       1099.08       998.85       719.35

Sept 12       3131.34       369.49       1103.37       1001.65       722.30

Sept 13       3098.94       366.36       1095.63       992.00       716.45

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