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Monsoon to decide market direction

Virendra Verma

THE issue of Ambani brothers was back to the fore on the bourses with Reliance group stocks hogging the limelight last week. But the clarification from Reliance Industries put the bulls on the backstage for the time being.

There seems to be a lot of optimism on this issue and going forward, a positive end to it would add fuel to the general market.

This week is going to be keenly watched by the market players. This is not because of any corporate announcements or news of hike in fuel prices, but the monsoon.

The progress of the first week of monsoon would be known during the week and if the rains hit Mumbai in a couple of days, it will not only give relief to the financial capital which is reeling under hot and humid conditions, but boost the stock prices, especially of FMCG sector.

Last week, key stock indices - the BSE Sensex and the S&P CNX Nifty - moved in a narrow range. The Sensex gained 28 points while the Nifty closed marginally lower.

But the interesting part was that the Sensex failed to close above the psychological 6800 level and the Nifty 2100 mark. But these levels are crucial, as the market players would watch these levels keenly.

But going by the feedback from the market players, these levels may be broken this week.

Some selling is also due to several initial public offerings that opened last week and a few more are expected to open this week.

The IPO of Provogue received good response with the issue being subscribed by more than 11 times on the first day while the offer of Jindal Poly Films could not fetch minimum subscription even after two days. This shows that there was interest in IPOs rather than in issues of listed companies.

Yes Bank IPO is slated to open this week. There are smaller IPOs also which are hitting the market every week. Once these issues are over (by this week-end), one could see further buying in the secondary market.

The optimism is arising out of good results posted by most of the companies for 2004-05 and the first quarter is also expected to be good for most of them.

Some disappointment was seen on commodity front last week when steel and aluminium companies reduced the prices.

But looking at the stock price movement of these companies, the market has absorbed the fall and further fall in the commodities' prices looks unlikely for the next few months.

Within the commodities, cement stocks could fall but this should not be seen as any panic situation, because every year during this time (monsoon) construction activity slows down leading to some pressure on cement prices.

For small investors, they should stick to stock specifics and should not be carried away by the Sensex and the Nifty movements on either side. In this category, the hotel sector is placed well in the current situation taking 6-9 months perspective.

There was some selling in mid- and small-cap stocks on Thursday and Friday last week.

Also, there has been sudden spurt in various stocks with weak fundamentals but investors should avoid such stocks.

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