Despite a static rate of inflation during the week, the stock market snapped a five-day-long rally as index heavyweights witnessed selling ahead of the US economic data. Further, there were talks on the Street that the Reserve Bank of India had convened a meeting to regulate the end use of funds raised by corporates via external commercial borrowings (ECBs). This gave jitters to a market that has been driven by liquidity factors.
"With domestic interest rates having gone up, putting curbs on ECBs would make fund raising expensive for companies," said an analyst of a domestic brokerage firm who wished anonymity.
Tracking weak Asian markets, the benchmark index of the Bombay Stock Exchange slid by 320.30 points or 2.25 per cent to close at 13,908.58, while the broader Nifty of the National Stock Exchange ended the day lower by 94.35 points or 2.26 per cent at 4,083.50.
Analysts are of the view that the absence of any major positive triggers and the approaching lean week (two consecutive trading holidays) could see the markets lack in strength.
"Reliance results came yesterday and the markets have seemingly run out of any fresh triggers. Investor participation could be very low in the next week. The market is expected to show a clear direction in a couple of weeks from now," says Sandeep Shenoy, strategist of Pioneer Intermediaries.
A day after the company announced above-expected results, the shares of index heavyweight Reliance Industries declined by 3.67 per cent on the BSE.
Despite recording an 89 per cent growth in net profits in the fourth quarter ended March 2007, shares of Bharti Airtel plunged by 4.5 per cent to end the day at Rs 826.25.
Other heavyweights like SBI and Tata Steel also lost more than 4 per cent. The biggest loser on the Sensex was Cipla, down 14.27 per cent. The company had reported 34 per cent decline in net profits in the January-March 2007 period.
Charts are showing a downward pull in the markets after Friday's fall, according to technical analysts. They expect the correction to continue through the next week.
"The market is looking a little bearish now. The Sensex may test 13,400 levels in the next week. On the higher side, the index may face strong resistance near 14,100," says Sandeep Wagle, chief technical analyst of Angel Broking.
Nifty May futures, or the notional bet on the index movement, finished the week at a discount of 8.65 points to the underlying, indicating bearishness.