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August 11-14: BSE suffers setback

The market suffered a major setback on the Bombay Stock Exchange following speculative selling pressure coupled with lack of buying support from domestic institutional investors and limited purchases by foreign institutional investors during the week ended August 14.

The BSE Sensex slipped by 76.57 points to 4320.97 as against the previous week's close, while the BSE-100 index moved down by 34.80 points against last week's close of 1914.02 points.

The BSE-200 and BSE dollex indices also eased by 6.10 and 2.84 points to 419.77 and 195.60 points against the previous close of 425.87 and 198.44 points respectively.

According to market analysts, there are various factors which hampered the trading sentiments on the BSE during the week. The Securities and Exchange Board of India's decision to defer its decision on the J R Verma Committee recommendations on the 'badla' system, a weak GDR market, and corporate wrangling in Asian Paints were cited as the prominent reasons behind the bearish phase on the BSE.

The market opened on a jubilant note on Monday as the market players made heavy purchases on the expectations that the badla the in the old format would be reintroduced after SEBI's clearance. However, the SEBI board threw a spanner on their expectations in their Tuesday's meeting. The market reacted sharply to the decision much before the regulatory board's official press briefing to the media on that day.

The FIIs who were active in the previous week made limited purchases while the domestic institutional investors did not support the market, they said.

The standoff between Asian Paints and the brokerage firm DSP Merrill Lynch over the backing out by the FIIs Capital International and Morgan Stanley, who refused to honour the deal to buy the 3.5 million shares finally ended on August 13, when Managing Director Atul Choksey announced that the deal was off.

The Asian Paints scrip fluctuated widely during the week as rumours persisted in the market that an eight per cent stake will be picked up by a multinational paint company and that Choksey had approached Kotak Mahindra Finance Ltd to negotiate the deal on his behalf.

Activity in the GDR market has slowed down after rallying for three consecutive weeks. The 64 GDR fell an average 1.88 per cent compared to 2.76 per cent in the underlying shares.

Total turnover on the BSE reduced sharply by Rs 22.67 billion to Rs 41.21 billion against the previous week's turnover of Rs 55.62 billion.

The FIIs made purchases in the fundamentally strong scrips like Sterlite, Reliance, State Bank, ICICI, TISCO and ITC.

Meanwhile, similar kind of trading sentiments were witnessed on the National Stock Exchange during the same period. The NSE-50 index drifted lower by 29.05 points to 1227.90 against the previous week's close of 1256.95 points. The midcap index also fell sharply by 34 points to 1326.10 points against the previous close of 1360.10 points respectively.

The total turnover on the NSE also reduced sharply by Rs 26.9 billion against the previous week's turnover of Rs 82.51 billion.

UNI