In a week, when wholesale price index (WPI) based inflation surged to ten month high at 5.02 per cent, crude oil prices hit a record high at 105.40 per barrel and Indian Rupee hit a six month low, the benchmark Sensex of Bombay Stock Exchange (BSE) nose dived 1,603.20 points to end the week near six month's low below 16,000 level at 15,975.52 due to extended lack of buying interest and relentless selling pressure across the counter, marketmen observed.
Meanwhile, the broader based S&P CNX Nifty index of National Stock Exchange tumbled by 451.9 points to 4,771.60 on the same sentiments. The BSE Mid-Cap index fell 11.89 per cent to 6,804.39 and the Small-Cap index slumped by 12.66 per cent to 8,409.18 in the week. The market breadth remained negative throughout the week. Realty bank and power stocks were the worst hit.
Moreover, the market witnessed a sharp fall during the week on worries over global economies heading towards recession amid extremely negative sentiments prevailing over the board, world-wide, market analysts said.
Analysts maintained that taking a row with the other Asian markets, Indian market was passing through a correction phase, as the valuations were very high earlier. In the last two months, Sensex had dipped nearly 33 per cent, from its all time high reached at 21206.77 on January 10, 2008 to 15,975.52 on February 7, 2008. The mid and small caps have fallen 50.58 and 69.34 per cent respectively to underperform the benchmark index during the same period.
''Even though the market upsurged in few sessions during the period, mid and small caps remained under an acute pressure as there was always a correction gap of 15 to 20 per cent between the heavyweight and small stocks,'' a senior broker with a leading broking company said.
In the last two months, Reality Index, which was hit badly, plunged 78 per cent, followed by power dropping by 56 per cent, bankex and capital goods index also tumbled by nearly 50 per cent, marking a strong bearish trend in the market. Analysts attributed the fall in the bank stocks to causes like proposed loan waiver in the Union Budget affecting the interest margin of banks and reports of banks have been dented by the sub-prime losses due to their exposure to the overseas market.
However, the major banks, including ICICI bank and Bank of Baroda, clarified that they were hardly under the influence of the ongoing sub-prime crunch.
Nevertheless, IT stocks recovered slightly during this week as the Rupee weakened against the US currency. The Indian unit had hit six month low at 40.52/53 per dollar. ''IT stocks were the least influenced in the bearish sessions on the positive sentiments due to the weakening Rupee,'' analysts said.
The other index which were not affected much, Auto, FMCG and Health care as they received positive support from the Budget. The FMCG was down by 16 per cent, Pharma was down by 17 per cent and Auto index was down by 27 per cent, from their high hit in January.
Auto stocks were supported after the Budget announced a four per cent cut on excise duty from 16 per cent to 12 per cent. Health stocks were supported by the provision of cutting down half the excise duty to eight per cent from previous 16 per cent. Similarly, FMCG recovered the early losses as the budget was consumption oriented.
Foreign institutional investors (FIIs) were net buyers of shares worth Rs 1,733.30 crore in the month of February 2008. They were net sellers of shares worth Rs 12,702.90 crore in calendar 2008, till 4 March 2008. Mutual funds bought shares worth Rs 513.90 crore in the same month.