The panic that has been set off will build up the pressure on the market and could result in the Nifty going down to 4,800 levels eventually

This week, US politicians reached a deal to raise the debt ceiling and save the country from defaulting on its fiscal obligations, shifting the focus to expenditure cuts that could see a slowdown in the world's biggest economy. The likely impact on other economies together with European debt concerns that now threaten to engulf Italy and Spain rocked stock markets globally, cutting off more than 5% in the Indian markets this week. This is the biggest weekly decline in the domestic market since October 2010.

The week began with small gains on Monday following news of the US debt deal. Mixed domestic indicators led the market lower the next day and weaker-than-expected results by DLF and Bharti Airtel put the indices under pressure again on Wednesday. While the market opened firm on Thursday, higher food inflation data pulled it down by the close.

The rout in the US and European markets on Thursday dragged the Asian markets sharply lower on Friday and India was among the major losers, losing more than 2%. On a weekly basis, the Sensex tumbled 891 points to settle at 17,306 and the Nifty declined 271 points to 5,211.

The market is likely to remain down for a few days before there is a short rally. For the uptrend to continue, it is essential that the Nifty closes above the 5,400 level.

Late on Friday, Standard & Poor's downgraded the US government's sovereign credit rating by a notch from 'AAA' to 'AA+'-an unprecedented move that will hurt investment sentiment even harder. However, S&P affirmed the 'A-1+' short-term rating.

All sectoral gauges ended lower, and the BSE Realty and BSE Metal indices both tanked by 7%, while BSE Oil & Gas and BSE PSU each lost 2%.

The only gainer on the Sensex this week was ONGC (up 3%). The top losers were Sterlite Industries (down 11%), Reliance Communications, DLF, Mahindra & Mahindra and Jaiprakash Industries (all down 9%).

BPCL (up 7%), ONGC (up 3%) and Cipla (up 1%) were this week's gainers on the Nifty. Reliance Capital (down 14%), Sterlite Industries (down 11%), Sesa Goa, RCom (down 10% each) and M&M (down 9%) were the major losses.

Food inflation climbed up again to 8.04% for the week ended 23rd July, from a 20-month low of 7.33% in the previous week. The rise was mainly due to higher prices of onions, fruits and milk.

Also this week, the Prime Minister's Economic Advisory Council lowered its growth forecast for the current fiscal to 8.2%, below the government's target of 8.5%. It projected headline inflation to remain a high 9% till October, saying it expects price pressure to start easing from November, to around 6.5% by March 2012. The Council stated that while pressure from food inflation had fallen recently, the rate of price rice still remained quite high with the possibility of a further surge in the coming months.