So, clearly, if we do have to make a benchmark, it has to be the Dow and not the NASDAQ. Tracking the NASDAQ and ignoring the Dow does not make sense.

But the stock market participants argue that most of the stocks on the Sensex have become irrelevant since all the activity is only in the TMT sector. For example HFCL, Global Tele, Silverline, DSQ Soft routinely hit the top of the charts in terms of volumes and none of them is in the Sensex. So if one is interested in investing or trading in momentum stocks one should track the NASDAQ.

Such arguments could be misleading. One could do well to know how the NASDAQ behaves
and what the fate of TMT stocks has been in the US markets. But the relevance ends there.
What the stock market participants should know is that the movement of US stocks is governed
by the macroeconomic factors of the US economy. Whereas, the rise and fall of Indian stocks
reflect the Indian economy and state of the particular industrial sector. The link with the American stock market may seem rather tenuous. After all, profits of domestic Indian companies may have nothing to do with American investor perceptions about `dotcom' company stocks, which drive
the NASDAQ market. Moreover, companies in the manufacturing sector, which account for a substantial chunk of value, may not be directly affected by any downturn in US Infotech stocks.
For most companies, their exposure to the US market itself is at best meagre. They, after all, cater mainly to the domestic market. Even investments wise, FIIs tend to come close to the Indian funds
on daily activity basis, and hence are not alone in driving the valuations.

The state of the Indian economy is very different. The macroeconomic factors governing the Indian market are quite different from those that govern the US market.

The markets have traditionally relied on causal relationships. Price-impacting causes are like
fashions, changing over time. The NASDAQ performance is only the latest in the series of events
that have acted as a bellwether for the Indian stock markets. The media hype about the NASDAQ
is perhaps unnecessary. Investors should definitely be aware of what the NASDAQ is doing. But
they should certainly not link it with Indian stocks. A sound economic analysis of the market as a
whole based on local parameters is the best long-term strategy.

Wait for the dip :

Flattering to deceive, is perhaps the best way to describe how the market behaved during the
bygone week. Following a status quo on Monday, the rally on the subsequent two days led to watchers heaving a collective sigh of relief. But this hope was to be belied by a minor correction
on Thursday. However, worse was to follow. Friday's have indeed turned black for the markets,
with the fourth successive crash on a Friday during the month. This settlement ending crash once
again took the breath away.

Market dynamics during the week :

The crash in volumes however, is a good augury as this clearly indicates that it has been
predominantly at the expense of a reduction in speculative transactions. On the BSE, the
delivery volumes as a percentage of total volumes increased from 18.1% for the week ended
March 2 to 28.36% for the week ended March 23, 2001. The average daily volume has
declined from Rs53bn to Rs11bn during the comparable period.

FIIs are the saving grace :

The above chart clearly indicates that the fate would have been worse had there been an abatement
in FII investments. Bargain basement hunting seems to be the driving force for this commitment on
the part of these players.

Some key gainers during the week :

The restriction of activity to a few stocks and the spurt in declines when the market dips is an
indication of the bearish sentiment pervading the market. The rush for profit booking/salvaging
capital is all the more intense in the case of non specified scrips as the chart below clearly
highlights.

A very thin spread (Advances-declines ratio) :

While the question mark on the banking sector and the economy pursuant to the debacle in the
stock market was a predominant reason for the crash on Friday, the unearthing of a Rs410mn
billion scam has also aided in depressing the sentiment at the bourses. Following this, SBI has
cut credit facilities to bullion dealers.

While old economy stocks were generally not hampered by the crash, oil stocks too found buyers
due to the crash in crude prices, prospects of M&A in the sector gathering steam and the impending deregulation. ATF prices have been decontrolled. UK oil prices crashed by nearly a dollar during Wednesday and Thursday on the news that crude inventories in USA rose by as much as 11mn
barrels during the week due to record imports and low refinery utilisation.