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Markets subdued as investors turn cautious

Indian equities ended on a subdued note for yet another week, which passed without any concrete decisions by the government on fiscal reforms amid a warning of downgrade by rating agency Fitch and a sharp cut in India’s FY13 GDP growth forecast by the PM’s economic panel.

Indian equities ended on a subdued note for yet another week, which passed without any concrete decisions by the government on fiscal reforms amid a warning of downgrade by rating agency Fitch and a sharp cut in India’s FY13 GDP growth forecast by the PM’s economic panel.

While markets touched fresh five-month highs this week, investors traded with caution on fears of negative news flow, in both domestic and global markets. Benchmark indices, which gained more than 2% this week, witnessed selling pressure towards the close of trade on Friday after the CAG report was tabled in the Rajya Sabha.

The 30-share Sensex ended the day at 17,691.08, up 0.2% from close on Thursday and up 0.8% from the close of the previous week. The broader Nifty ended at 5,366.30, up 0.06% from close on Thursday and up 0.3% from the close of the previous week.

The BSE Oil & Gas index touched a new five-month high of 8,595.60 on Friday, before closing the day at 8,500.52, down 0.3%. On a weekly basis, BSE Auto and BSE Oil & Gas indices gained 2% and 1.6%, respectively. Reliance Industries advanced 4.5% this week, ending as the top gainer on the BSE. Among other gainers, Cairn India, IT major Infosys, Mahindra & Mahindra, Maruti Suzuki, Hindustan Unilever advanced in the range of 2-4%.

?The CAG report has once again caused chaos and instability in the market. It gave reasons to panic and, hence, the market saw huge selling pressure. I doubt if the rally will continue next week unless there is clarity on the CAG report,? said Ambareesh Baliga, COO, Way2Wealth Financial Services.

A section of market players, however, brushed aside the CAG report, saying it only talks about notional losses. Nonetheless, it has again raised fears among investors as not many are equipped to comprehend the data with ease.

The CAG report slammed the government for unduly favouring certain companies and causing a losses of crores of rupees to the country?s exchequer. According to the CAG report, the losses in coal allocation block,estimated at R1.86 lakh crore, are even higher than the notional loss incurred in the 2G scandal. On a weekly basis, BSE Metal index witnessed a sharp fall this week. The metal index declined more than 2%. Hindalco Industries was the biggest loser this week, falling more than 6% on the BSE, followed by State Bank of India, Tata Power, Tata Steel and SAIL, all falling in the range of 2-4% this week.

BSE FMCG, BSE Capital Goods and CNX Bank Nifty continued to lag the broader markets and ended down 1-3% this week.

FII inflows also remained muted this week. Foreign institutions roughly bought $195 million worth of Indian equities this week against $544 million in the previous week. The net FII inflows in 2012 are now pegged at $11.40 billion.

?At present, our equity markets are buoyant on investments by foreign institutions even when the fundamentals are weak as FIIs are hopeful of some action from the government. However, a lack of policy actions by the government may force FIIs to liquidate their positions, which could cause a sharp correction in Indian equities,? Baliga said.

Meanwhile, US markets gained 1% so far this week and European markets advanced in the range of 1-2% on favourable economic data. Germany ? the largest economy in Europe ? reported better-than-expected second quarter GDP numbers. US July retail sales numbers also beat market expectations with a 0.8% increase from the previous month and 4.1% in July 2011.

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First published on: 18-08-2012 at 01:10 IST
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