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Jayanta Mallick

DALAL Street is turning bullish by the day. It appears that the majority of the market players are ready to bet on a normal monsoon. Sixty per cent of the consumer demand depends on the monsoon, which roughly covers 70 per cent of the country's land area.

The liquidity is also clearly on the rise. On the whole, the stock market is preparing for a broad-based rally in the short term.

Last week, the BSE Sensex moved up by handsome 3.85 per cent and the Nifty by 3.93 per cent. The BSE-IT Index recorded a dramatic gain of 8.70 per cent. The advance-decline ratio for the BSE A-group stocks was 126:72. The PSU stocks, including banks, however, witnessed a correction.

According to technical analysts, the next resistance for the Sensex lay around 40 points upward. The support level is available at around 80 points down the ladder.

The retail investors, mutual funds and foreign institutional investors are all seem to be in a positive frame of mind. The valuations are compelling and fundamentals are favourable. Thus, at the beginning of the week, the optimism is palpable.

The Sensex has managed to break the key resistance level at around 3,225 points. The benchmark index had retreated from these levels twice in April and May. But this time around, it breached the barrier convincingly with better volumes. This has lent confidence to the market to assume that the Sensex may stay on the upward course in the short term.

According to Mr V.K. Sharma, buoyancy in the sentiment has led the market to conservatively discount negative news such as one on the return of capital by the PSU banks. This week, market is likely to ignore the political problems posed by Babri accused or a slight delay in onset of monsoon.

The market mood is also influenced by a change in direction for the better in the US economy.

Mr Gul Techchandani of Sun F&C, who was in the US last month, said funds were now looking at India with greater attention as an investment destinations.

The redemption pressure on the mutual funds, a reality even a month ago, has also been replaced by fresh flows, he felt. "The fundamentals have been alright in the first quarter. But investors wanted further confirmation. Now it seems, the psychological turnaround is taking place".

According to a senior banker, the credit offtake has gradually been increasing during the first quarter. The general perception is that the housing finance and the retail credit have been providing a booster effect to the economic activity. A good monsoon could be the clincher for further momentum.

According to Mr S. Nagnath of DSP Merrill Lynch, more than five per cent GDP growth and a strong rupee are likely to provide enough impetus for the FIIs to direct higher flow to India this fiscal. FIIs have pumped in Rs 600 crore this month so far and in May they brought in around Rs 1,221 crore. However, trend is not to put all eggs in one basket.

This week, apart from the progress of monsoon, the market would be sensitive to developments around the Government's moves on the disinvestment front and stance over the premium issue related to the return of capital by the PSU banks.

Derivatives data: The Nifty June contracts closed with a backwardation of 7.20 points. The total open interest in the futures contracts for June rose by 51.91 per cent. Open positions in futures, calls and puts rose by 29.30 per cent, 80.93 per cent and 125.14 per cent respectively.

The SBI counter once again topped the open interest list with outstanding worth Rs 465.04 crore. The Tata Steel, HPCL and Reliance Industries contracts piled up outstanding positions worth Rs 381.77 crore, Rs 350.51 crore and Rs 328.57 crore respectively.

The Polaris counter touched 98.76 per cent of its market wide position limit. The Tata Steel, Mastek and Digital GlobalSoft counters exhausted 86.97 per cent, 78.87 per cent and 77.77 per cent of their respective limits.

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