On Saturday, Cabinet Committee on Disinvestment took a few steps towards selling government stakes in firms, but shied away from the big-bang decisions expected by the market.

The meeting approved the sale of Indian Petrochemicals Ltd's (IPCL) Baroda plant to Indian Oil Corporation (IOC) at a negotiated price.

But fund managers did not see the sale as privatisation because IOC is a government owned company.

It was also decided to invite fresh bids for IPCL's two other plants at Gandhar and Nagothane.

The committee, which dropped plans to privatise Mahanagar Telephone Nigam Ltd (MTNL) and Videsh Sanchar Nigam Ltd (VSNL), decided to set up a panel of bureaucrats to oversee the disinvestment of India's largest car maker, Maruti Udyog Ltd (MUL).

Fund managers said the decisions will hit market the sentiment, already worried that the government is not doing enough to speed up reform.

"The government has messed up a golden opportunity by not taking concrete decisions. The market will definitely react negatively to this move," said , Chase JF Asset Management, chief investment officer UR Bhat.

The markets had expected the meeting to discuss the sale of stakes in other government firms. But this did not happen. Bharat Petroleum Corporation ltd (BPCL) rose 7.25 per cent to Rs 207.70 last week, while Hindustan Petroleum Corporation Ltd (HPCL) gained 18.58 per cent to Rs 140.10 on expectations that the meeting would discuss the sale of government stakes in them.

The 30-share benchmark Bombay Sensitive index (Sensex) ended at 3905.84, losing 0.89 per cent.

"I think shares of the state-run firms in particular will be hit as a result of the delay in privatisation," said a Bombay stock exchange broker, Ajit Ambani Chartists see limited downside Chartists see the market range trading next week, but a breach of key levels could mark a trend reversal to send prices higher.

"I suspect we are close to the bottom and even if weakness persists, the downside for the Sensex is limited," Trendwatch (India) Pvt Ltd's technical analyst Deepak Mohoni, said.

"But an intermediate target of 4016 has to be reached for any reversal to materialise," Mr Mohoni added. The intermediate target was based on last week's peak struck on Wednesday, he said.

A close over 4000 would also ensure a breach of a falling tops pattern, analysts said.

"Lower tops formation is typical of a market in correction phase, but since last week's pattern is not accompanied by lower bottoms it is not worrisome," said Livestock Information Technologies' Vicek Patil. High global oil prices concern investors because of their impact on India's fragile economy. A global meeting of producers and consumers in Riyadh did little to allay fears that high prices may stick for some months yet.

"This is a negative for the market going forward," Sun F&C Asset Management India's chief investment officer, Gul Teckchandani said.

Oil prices, trading above $30 per barrel for some months, are expected to remain high due to forecasts for a harsh winter and low stocks.

"Output will not be increased before the January 17 (OPEC) meeting. This is not in the pipeline," Kuwait oil Minister Sheikh Saud al-Sabah said on Saturday.

Fund managers said they favoured technology and telecom shares over old economy stocks. "Technology shares have been consistent performers and they are largely immune to an economic slowdown. We maintain our positive view on the sector," a fund manager said.

(Reuters)