The key indices, Sensex and Nifty, plunged more than 9 per cent for the week as the Union Budget disappointed investors who had high hopes of economic reforms from the Budget. Another key factor for the markets' debacle in the week was the susta ined pull out by foreign institutional investors (FIIs) on increased possibility of rating downgrades by the leading rating agencies, including Standard & Poor's (S&P) which made a cautionary statement on India's sovereign rating.
The markets stayed highly volatile throughout the week amid positive and negative developments. In the week to July 11, the Bombay Stock Exchange ended at an eight-week low of 13,504.22 points, with a net fall of 1,408.83 points or 9.45 per cent, from i ts last week's close. Similarly, the Nifty tumbled 420.35 points, or 9.50 per cent, to settle the week at 4,003.90 points from its close last week.
Investors were disappointed mainly because of the absence of the anticipated major economic reforms in the Budget which set the fiscal deficit high at 6.8 per cent for 2009-10. Meanwhile, IT bellwether Infosys Technologies announced better-than-expected first quarter results, beating the market projections of a fall in its consolidated net profits.
The Indian economy showed signs of recovery with its industry growing 2.7 per cent in May and manufacturing sector output rising by 2.5 per cent during the same month.
As per the provisional data, FIIs sold shares worth Rs 4,681.30 crore in equity during the week. Analysts said the market overlooked some promising measures in the budget such as focus on rural infrastructure and growth. The International Monetary Fund (IMF) on Wednesday raised India's growth forecast to 5.4 per cent for 2009, while projecting that the world economy would shrink by 1.4 per cent.
The analysts the market is expected to get a direction after the release of first quarter corporate earnings. The market seems to be in an oversold zone and any positive trigger could result in a hectic shortcovering of positions, they said. The FMCG st ocks bucked the negative trend on the back of a thrust to the agriculture sector in the Budget and soared 4.15 per cent.
The BSE Realty Index tanked 17.16 per cent, the Bankex tumbled 13.47 per cent and BSE CG index lost 13.23 per cent. The trading volume dropped to Rs 27,528 crore on the BSE and Rs 86,675 crore on the NSE from last week's Rs 30,188 crore and 88,079 crore respectively.