The Telegraph
Since 1st March, 1999
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Last Week

The numbers say it all. The market is inexorably slipping again as I had pointed out some weeks ago and reaffirmed last week. The weekly closes of the sensex have been as follows: 3181, 3141, 3098 and 3024.

From the euphoric top of 3228, following the bailout of Unit Trust of India (UTI), the index has lost 200 points and is less than 100 points away from the 2002 low of 2931. I had said last week “The weekly trend is clearly down despite everybody proclaiming that UTI’s sales will stop now and the market will start climbing up.”

I had also suggested that beginning today we may see another down leg spread over 8-10 days.” The Monday intra-day high of 3110 was the high of the week, achieved in the opening minutes. After that it has been a continuous downward journey that reaffirms my belief that we are in a continuous downtrend. I had also said last week that the full impact of poor economic governance is still a few months away but this is what will hit the market hard.

No sooner had I said this than we got a taste of it. Standards & Poor downgraded India’s local currency debt to junk bond status due to stalled disinvestments and sluggish progress on economic reforms. We will still have many more hits to take from here on if the state and central governments have to balance their books.

Last week, the anti-imperialist, anti-capitalist, noble government of peasants, workers and poor, announced that this year’s bonus is being halved. Chickens are coming home to roost in a land where poets have become chief ministers and prime ministers. Between now and the budget, get ready for more such shocks. The books are not balancing.

The market remains under a climate of mostly unfavourable valuations, very unfavourable economic conditions and now an unfavourable trend. It has failed to enjoy a sustained rally following any good news and has slumped back on bad news. Investors appear to be very bullish on tech stocks still.

Satyam, Wipro and Infosys Technologies have hardly participated in the downturn. I am surprised. Last week EDS, the giant IT outsourcing firm in the US, said that IT spending by US companies is simply frozen (it’s a freeze, not a slowdown).

EDS cut its earnings estimate by 80 per cent. I believe that despite the current bullishness in the stocks of software companies, we have not seen the worst. The situation remains negative for me but as I have said before, even the most negative situations yield substantial rallies before a fresh decline starts. I guess we will see that soon but the signs are not there yet. It is still down.

Movement of Indices

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

One year ago       2761.66       280.56       826.37       898.80       570.40

One month ago       3089.58       375.54       1123.31       988.55       734.55

One week ago       3098.94       366.36       1095.63       992.00       716.45

Sept 16       3076.01       362.64       1084.23       985.75       709.70

Sept 17       3103.90       365.39       1092.06       994.90       713.65

Sept 18       3069.78       361.60       1080.55       983.60       706.75

Sept 19       3040.30       358.56       1070.21       976.05       700.95

Sept 20       3024.35       357.97       1069.51       969.60       698.85

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