The market was extremely volatile during the week ended 19 November, a truncated one due to a holiday on Wednesday. Heavy profit taking, some weak cues from global markets and concerns over the impact of the CAG report on certain irregularities in the 2G spectrum allocation on the Indian political scene took a fairly heavy toll of stocks during the week.
The Sensex tumbled by 571 points or 2.8% to 19,585, retreating a long way down from the 21,000 mark it had touched barely a few sessions ago. The Nifty index of the National Stock Exchange, which had very nearly breached the all-time high of 6347 on the Muhurat Session on 5 November 2010, ended the week with a lost 181 points or almost 3% at 5890. Midcap and smallcap stocks took a battering as well, dragging the respective barometers down by over 4% and 6%.
Concerns about a likely hike in interest rate in China and a possible slowdwon in global economic growth hit global markets hard last week. The debt crisis in Ireland hurt sentiment as well.
The mood is unlikely to be any significantly positive next week. There may be some short-covering ahead of November series derivatives expiry. Bargain hunters may also step in and push up prices of some front line stocks.
Economic reports from the U.S., especially the ones on existing and new home sales and durable goods orders, will be eyed. Investors will also be closely watching the developments in China for any monetary tightening moves by the government. Ireland is most likely to accept a bailout package from the European Union and International Monetary Fund. Any negative news on this front could set the stage for some heavy selling in global markets and investors back home are not likely to act any differently.
There is a fear that the market may run short of liquidity at some point of time in the near future what with a slew of new issues and follow-on offerings waiting in the pipeline. Among the major issues are the ones from Indian Oil Corporation, SAIL, Hindustan Copper and Shipping Corporation of India.
The CAG report says the government suffered a loss of Rs 1,76,000 crore due to alledged irregularities in the spectrum allocation. The Supreme Court asked the PMO to submit an explanation why the government did not react for about 11 months to the letter sent by Janata Party president Subramaniam Swamy seeking action against the then telecom minister.
On Saturday, 20 November 2010, the PMO told the Apex court that the Prime Minister acted promptly within days on the complaint of Subramaniam Swamy. The prime minister is reported to have referred the first two complaints of Swamy for examination to the concerned officials within two days, and the next two complaints within days of receiving them.
Reliance Communications, Unitech and Videocon Industries, among the companies alleged to have benefited by the improper allocation of 2G spectrum, saw their shares plunging sharply last week. There may be a rebound of sorts at some of these counters, but investors are most likely to tread cautiously in the near term.
The market is likely to see some tough sessions next week. Movements will be extremely listless with global economic reports, November series derivatives expiry and the opposition parties' stand on the spectrum allocation issue setting the trend for most part of the week.