The Hindu Business Line : All eyes on IPCL disinvestment -- Markets to sustain rally with correction

THE Home Trade monster has not dampened the prevailing positive sentiment. The market seems poised for a sustained rally in the coming week with corrections mid-week. Though political developments are expected to take a backseat for the time being, marketmen continue to be a little apprehensive over the Gujarat situation.

The single important decision awaited by the market is the final outcome on IPCL disinvestment.

"Market rumour is that the Government will get a price of more that Rs 200 for IPCL shares. If this expectation turns out to be true, it will give PSU stocks a further push," said a senior broker operating on the National Stock Exchange and Bomaby Stock Exchange.

Marketmen feel that if IPCL goes to a private company, the market will react very positively; if it goes to another PSU, then PSU stocks will emerge as gainers.

Analysts too feel that PSU disinvestments and political developments will be the main determinants alongside important corporate results.

"There are visible signs of economic revival. Commercial vehicle sales of Tata Engineering and Ashok Leyland have moved up considerably, which suggest increased commercial activities and goods movement. Moreover, people have investible funds; but at the existing interest rates, investment options are restricted. So, one may expect that investors will pick up equities at the present levels which are attractive," according to a senior analyst with IDBI.

On the bonds market, marketmen say that bonds will not be as attractive as equities because RBI has left interest rates unchanged. The inflow into bonds may slow down and bond prices may not go up during the week.

Gilts scam rocked the gilt market and the yield on the 10-year benchmark 11.03 per cent 2002 series rose to 7.66 per cent on Friday, up 15 basis points.

Initially, the bond prices rose on the expectations that inflow from bonds and Treasury bill redemption coupon payments would improve liquidity.

Consequently, the yields fell to 7.43 per cent mid-week.

But with profit-booking, Rs 6,000-crore auction scheduled for Monday and the widening gilt-scam landscape — the latest victim being the Seamen's Provident Fund scheme managed by the Ministry of Shipping, which announced it has lost Rs 92 crore, the negative market sentiment could be expected to spill over to the coming week, said Mr Arvind Kumar, an analyst with Value Research, the firm which tracks the capital market and mutual funds.

"The RBI will auction 8-year and 20-year bonds worth Rs 6,000 crore on Monday. Since bond auction typically has a negative impact on prices due to the liquidity effect, bond prices may take a dip initially but should recover by Friday.

Overall, a range-bound week ahead," Mr Kumar said.

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All eyes on IPCL disinvestment -- Markets to sustain rally with correction