The Hindu Business Line : Damp sentiment likely to continue

THE market generally lay low last week and is likely to remain infirm this week also. A truant monsoon and the killings in Jammu induced an undertone of panic early last week from which it did not recover. To top it all, the sliding US market indices depressed the sentiment for the export-reliant tech sector stocks further.

Not only the heavyweight domestic indices such as the Sensex and Nifty declined, the broadbased S&P CNX 500 stepped down to 769.10 on Friday from the previous weekend level of 784.25 points. The volumes also tapered off further.

Foreign institutional investors continued to sell more than they bought. The total FII gross sales figure last week stood at Rs 480 crore, while the gross purchases were placed at around Rs 473 crore. The net investment came down to Rs 7 crore from Rs 9 crore in the previous week. The figures are indicative of the fact that majority of the 496-odd FIIs are largely choosing to remain inactive.

According to Mr John Band, an independent analyst, last week an FII sold Nalco shares worth around Rs 83 crore. "Quite a number of worries continue to haunt the Indian market. The political risk factor apart, worries about delayed and patchy monsoon as also about the alleged small cap stock price manipulation have made the Indian turf a little more unfavourable for portfolio managers of overseas funds" Mr Band said.

According to him, the divestment strategies for the PSUs do not yet seem to be encouraging for the foreign investors either. As a result, even the old economy and PSU stocks, which are considered cheap, are not attracting investment. "In fact, some of the FIIs are making an exit from the counters, which they had held on for some time now," he said.

Even though it is generally believed that some of the stocks of the Indian companies have come out or in the process of coming out of the commodity downtrend, overseas investors are still not confident of utilising the buying opportunity. "The Tata Steel stock is a relatively lucrative bargain for a US or an European investor than Posco in view of the prevailing prices and currency valuation," he pointed out.

For mutual funds and FIs, the last week was also one of net sales. All these factors have taken the steam out of the PSU and mid-cap stock rally.

This week the tech stocks may witness a weakening trend, except for those active in the business-processing field, according to analysts and brokers. The WorldCom and Modi Xerox factors are likely to dampen the sentiment.

The silver lining may be that some of the PSU stocks, including those in Punjab, Gujarat and Tamil Nadu, are riding on the divestment trigger.

The auto/auto ancillary stocks are likely to rule strong on sales growth news. But if the rural market is hit by inadequate monsoons then the two-wheeler, tractor and the fertiliser stocks would be the first to be affected, Mr Mathew Easow of matheweasow.com felt. "As it is, the monsoon season is a lay-off time for various sectors, but more delay in the breaking of the monsoon may break the stock market," Mr Easow observed.

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