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Last Week

The bounce eludes and the fall continues. I had expected a shortbounce back to 3050 and above and a sharp fall thereafter. However, the market has continued to drift down, for exactly thesame reason I had pointed out earlier — Reliance. I had said that this sensex heavyweight would be the next one to crumble and we saw the price sliding from Rs 280 levels to Rs 268 last week.

Added to this was a further fall in Hindustan Lever and ITC and the sensex closed the week down 60 points, the third consecutive week of decline. I am still expecting a short bounce and a major fall later, now that the results season is getting out of the way and all the major disappointments have been played out. But it is also quite possible that as fund managers finally wakeup to confront major global and local issues, they see no optimism and continue to sell. Here is a litany of pessimistic news.

China’s ability to grow and is in a serious doubt now that SARS has reached serious epidemic level. Without China, global growth would falter. Europe and Japan are not able to play locomotive and US is too bothered about policing the world rather than dealing with serious structural issues in its economy (weak dollar, trade deficit, huge domestic and foreign debt, budget deficit at federal and the state levels).

At the local level, as I have pointed out again and again, there is no pricing power, there is oversupply of everything from cars to soaps and state governments are getting weaker and weaker due to mismanagement, forcing them to raise taxes and sap the strength of both theconsumer and the business.

Even strong states like Maharashtra are now in serious trouble, while the leadership in states like West Bengal is absolutely devoid of any clarity or dynamism. All this is reflected in poor economic growth that in turn eventually keeps business growth in check. So, both the long-term and the short-term story looks uninspiring as I have been saying here for years.

What is different now is that finally this view is seeping into the confident fund managers and brokers who asked you to buy the dips because the Indian market is “very attractive at these levels.” There is a serious crisis of confidence among these people. They don’t have any conviction of buying anything from Hindustan Lever, to Infosys to Reliance. For the extreme short-term ICICI Bank looks like struggling to go up while Telco looks set to give up its ascent and start to go down.


Movement of Indices

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

One year ago       3359.64       394.83       1175.42       1094.30       771.20

One month ago       3140.42       370.23       1103.14       1011.30       721.60

One week ago       Closed       Closed       Closed       Closed       Closed

April 21       2996.97       357.86       1074.99       947.20       702.35

April 22       2985.54       357.05       1072.52       943.50       700.60

April 23       2947.33       353.85       1062.69       934.20       695.10

April 24       2937.23       352.76       1059.96       929.70       692.60

April 25       2924.03       350.98       1055.03       924.30       689.20

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