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Mumbai: The bears will be out in larger numbers on Dalal Street this week after a spate of data and a wobbly US economy combined to rattle investors and forced companies to pull back their initial public offerings (IPOs).
The Sensex, which suffered its fourth weekly loss in a row, can hope for little respite as large funds and retail investors become increasingly averse to risk.
"The market is in for a hard time," said equity trader Ashwin Dalal. "You have to brace for a shakeout."
India's benchmark short-term lending has been at a four-year high of 7.75 per cent for almost a year after the central bank raised them five times in 10 months from June 2006.
The Reserve Bank of India also tightened banks' reserve requirements repeatedly last year to restrain inflation and credit growth.
Technical analyst Kanu Dave said the Sensex could head towards 16,500 in the near term, with oscillators indicating the market was still close to the overbought zone even after coming off 17.6 per cent from a record high of 21,206.77 on January 10.
The Sensex fell 4.3 per cent last week to 17,464.89. It has lost 14 per cent this year after rising 47 per cent in 2007. The stocks slide pulled the rupee to an almost two-week low of 39.63 per dollar last week, and analysts expect more losses if equity outflows pick up.
Inflation unexpectedly accelerated to 4.11 per cent in the week ended January 26, the government said on Friday, even before fuel prices are raised. This would dampen expectations the central bank would loosen monetary policy.
The jittery market conditions drove investors away, hammering new share offerings. Emaar MGF Land and Wockhardt Hospitals, controlled by a local group pulled their IPOs on Friday.
Both the companies had cut their indicated price range and extended the close, but found the going hard and attributed the withdrawal to weak global sentiment.
Emaar MGF, which aimed to raise as much as $1.64 billion at the upper end of the price Rs530-630 band, was likely to scrape through but the managers were worried about a poor debut on listing.
Optimism
"We thought it best that the issue was withdrawn even if there was a very good prospect of seeing the issue through," Vallabh Bhanshali, chairman of Enam Securities, a global coordinator for the IPO, said.
Healthcare services firm Wockhardt, which hoped to raise as much as $165 million, received bids for just a fifth, according to data on the National Stock Exchange website.
The setbacks were mainly due to the global equities rout caused by signs the US economy, the world's largest, was heading into a recession despite hefty cuts in interest rates and a huge stimulus package.
Just before the market slide, Reliance Power had raised $3 billion in an IPO that was fully subscribed within a minute of its opening and drew record bids for $190 billion.
The share, which was priced at Rs450 - the upper end of the price band, will make its stock market debut on Monday.
In the grey market, the stock was quoted at above Rs1,000 but is likely to drop in line with the market.
"Reliance Power will be the cynosure of all eyes," Dalal said. "I don't see it holding up in four digits." The company had sold 228 million shares to the public.
- The writer is a journalist based in India.
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