The Hindu Business Line : Signs of weakness seen

THIS week the overall trend on Dalal Street cannot but be negative. The expiry of October derivatives contracts on Thursday is likely to force a much-awaited winding up of long positions in the first four sessions of the week.

The fundamental gravitational pull is provided by the upwardly mobile crude oil prices. The operators, FIIs and the big players do not seem to have the stomach to digest crude at $55 plus.

The other negative that may hit the market sentiment this week is an interest rate hike. Even if the central bank resorts to tokenism, at 25 basis points increase in the interest rate, it is going to be bad for the weekly outlook.

Common myopia: In the market place nobody is looking beyond the current quarter now. Even though in polite conversation, every market person loves to drum up long-term fascination for Indian equities, the near vision is impaired by a strong fear of further hike in global (as also local) oil prices and bad corporate results in the third quarter.

Last week, despite some good to better than expected corporate financial performances and improved profit guidance, the key indices could not get over the predicted weakness. The Sensex lost a net of 45.67 points through the week, while the Nifty declined by 15.25 points. In technical terms, the losses represented breaching of crucial support levels even though they were less than one per cent.

The S&P CNX 500 slid by 10.80 points.

Foreign institutional investors were net buyers, but their net investment figure declined to Rs 219.70 crore from Rs 410.60 crore in the previous week. For the last few weeks, FII net investment figures have been showing a declining trend. Incidentally, Thursday last, FIIs recorded their first net negative figure in October so far. The domestic mutual funds continued their streak of sucking out money from the system.

The week also saw the total outstanding position in the derivatives segment increase to a substantially high figure of Rs 12,921 crore for the October contracts. The figures also suggest that this month till date, the rollover in the derivatives has been significantly lower than that in September.

A negative breadth in the cash segment coupled with weak indices and high outstandings in the derivatives point to a disturbing trading trend.

Smitten by high inflation rate, smart money flow has in the last few weeks been moving from debt to equities. But, the last fortnight saw the money flow further change course, and is now either moving towards commodities or simply drying up.

Rely on Reliance: Some of the market players expect a miracle in Reliance Industries results this week. The wait in the derivatives is partly owing to this hope that the manufacturing companies may turn the tide.

There may not be a trend reversal this week if the crude prices move within a range of $2 a barrel. There may also be a positive blip or two in the coming sessions. But, a clear bullish thrust is most unlikely in the ring this week.

Feedback may be sent to jayanta_mallick@thehindu.co.in

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