The Hindu Business Line : Markets looking for value picks

THE secondary capital market is showing signs of a bull phase. "The erstwhile cash shares or medium and small capitalised shares now seem to be leading the bandwagon. Most of them have formed a rounded bottom on the charts. Though it is too early to make a definite assertion, the volumes signal that the last week's mild rally was fuelled largely by retail participation," observes Mr Vivek Mahajan, a noted broker-analyst.

According to market players and analysts, Sensex and its heavyweights are unlikely to witness dramatic movement this week, while the select side counters are likely to continue their upward journey. "In a timeframe of four weeks, the trend will possibly clear up. After another bout of modest rally this week, the mid and small cap stocks may see a downward correction in the next two to three weeks. The confirmation of a bull phase is likely to come after this corrective period," Mr Mahajan predicts.

The expansion of market breadth has reduced the relevance of the 30-share or 50-share benchmark indices and raised the importance of more broad-based indices such as S&P CNX 500.

The liquidity is also seen to be improving despite general abstinence by FIIs and selling by UTI. The largest mutual fund's offloading compulsion is that it is in the midst of a long redemption process of its various schemes. However, LIC is increasingly becoming more aggressive in its market activity.

The market is quietly undergoing a structural change. After the scam of 2001, the operators have turned less conspicuous in their activity. The volumes of small regional exchanges have almost vanished while a part of their businesses has shifted to the top two bourses. All these have a bearing on the trading pattern and valuations. The frenzy and hysteria of yesteryears have given way to caution, seasoned brokers feel.

"The circular trading is still present, but in a lesser degree. The attempts at stretching valuations to unreasonable heights are replaced by profit-booking and consolidation. Thus, the current scrip-specific rallies are punctuated by corrective phases," a NSE dealer opines.

Sectorally, according to market participants, the tech segment seems to have entered a weakening phase. Signals from Nasdaq and ADR/GDR markets also confirm that. However, some observers think that the top Indian IT scrip may occasionally defy the negative sentiment in the short-term.

The banking, auto and auto ancillary shares seem to be poised bright this week. The PSU stocks are still investors' favourites and with corrections, these shares may rule steady. Interestingly, last week saw some state PSUs attracting investors' interest. The trend may spread, brokers expect.

Select steel counters appear to have some steam left. The commodity sectors such as cement and paper may spring surprises. The top pharma counters also look good on the chart in the short-term except Ranbaxy, which was showing "divergence at the top signifying transfer of shares from stronger to weaker hands," Mr Mahajan observes.

The market is likely to continue its search for value pick in probable recovery stories. "The movements in the Bata or DCW counters are cases in point," Mr Ajay Jaiswal of Lohia Securities point out.

The prospect of TCS joining the market and positive noises from the primary market after a long gap may serve as additional factors for the current sense of well-being.

The market sentiment has already buoyed up somewhat following the apparent easing of tension between India and Pakistan.

The forthcoming results season has also placed the market in a state of expectation.

"Early signs of recovery could emerge from some of the results from the manufacturing and services sectors," a BSE broker observes.

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