The Hindu Business Line : Lack of buying support may weaken prices further

If the Finance Minister is successful in convincing the market players that the reforms would not be derailed, there is hardly any guarantee that strong buyers would re-enter market in the immediate term.

MARKET is on a meltdown mode. The big investors are generally selling and speculators are going short. Unlike on May 14, the weekend signals did not, however, suggest serious margin call pressure.

This week, in absence of substantial buying support, the key indices may fall further. All the technical charts - daily, weekly and monthly - are not bringing home positive indications.

The medium as well as long term moving averages are also putting forward bearish signals. Both the 13-week and 34-week exponential moving averages of the key indices are falling. The volumes have gone for a toss.

Are the Mungerilals of the stock market having nightmares over future of reforms? A few weeks ago, the proponents of "shining" campaign on the Dalal Street were seen thumping the table to assert that Indian market was cheap, even when 6,000 points were piled up on the Sensex scoreboard.

Compared to many in the emerging markets, P/E multiples of Indian equities suggested they were cheaper, the argument ran. Now they have gone underground. Overground are the sellers.

It is not a crime after all. But are the market "leaders" suffering from political prejudice?

The stock market is not known to be rational always in its steps. Homo sapiens, who walk on the Street, are driven by basic instincts - greed, fear and survival - and often suffer from tunnel vision. The bargain hunters, who must reflect more than lateral thinking, have gone with the wind.

In the last fortnight, the issue of continuation of reforms had dominated the market mind-space. The "lingering doubts" explicitly expressed by the market made the Finance Minister to take a decision to visit Dalal Street this week.

The FIIs, who have net sellers of late, have not really expressed their intent on exodus. On the contrary, many of the investment officials insist that Indian equities were still one of the best bets in the world. They do not also admit that political risk has shot up dramatically.

If it is a temporary cooling of heels for FIIs after pumping in millions of dollars in the local market, then it means absence of contrarians for the time being.

A self-imposed holier-than-thou attitude adopted by a section of the market players over freeing the economy from the perceived shackles may even bring the market in collision course with the political establishment of the day.

Thus it would be interesting to watch the market moves this week. Will the Street arrogance be expressed through volatile movement in indices when the Finance Minister is in Mumbai trying to reassure and clarify misgivings?

The axiom that people living in glasshouses do not throw stones may eventually prevail.

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