The Hindu Business Line : `No negative' is good news here

AS expected, the benchmark indices forged ahead last week to scale new peaks. The market regulator also vented its uneasiness, as was aired in this column, over the valuation of some small stocks. The retail oil product prices have also been revised upwards, which did not affect the stock market sentiment.

Last week, the liquidity flow was also strong to keep the benchmark indices flying.

This week, with hardly any negative looming on the Dalal Street horizon, the liquidity flow will dictate the market direction. The overseas fund flow to local equities has been steady despite some lull in fresh money flow into the emerging market funds. The domestic mutual funds and LIC appear to be poised to make new investments in equities.

However, in a market like this when everything seems picture perfect, sudden emergence of profit taking instinct for some investors may not be ruled out altogether. But, the presence of buyers or potential buyers appears to limit the downside.

There are a lot many newcomers among the FII brigade, who are taking a bearing in the market, at an all time high. Their preferences and perception of opportunity are different from those already entrenched. A slight correction may prompt them to enter the blue chips.

Among the local investor groups, many are in the cash and are likely to take fresh guard before beginning a new innings.

The overall scenario suggests that an element of timing could make the crucial difference this week for taking any call on the Sensex or Nifty stocks. The investment strategies adopted by the old overseas hands could prove to be a trigger, which in turn, could influence the liquidity flow.

On a scale of 1 to 10, chances seem to be delicately balanced in favour of the bellwether going upwards by a few hundred points this week. The downward correction in the global crude prices after hurricane Katrina hit the Gulf of Mexico and the US south-east coast has eased market worries somewhat.

According to oil analysts, next big flare in the crude price could come if the US forces an embargo on Iran and its oil. But probability of such an event seems remote.

The Union Finance Minister, Mr P Chidambaram's repeated assurances that the journey for targeted 7 per cent GDP growth rate for the country this fiscal is on course is also acting as a positive for the market sentiment.

In the space dotted by mid- and small-capitalised stocks churning has been the rule of the game for some time now. It provides both opportunities for profit booking and growth. But the risk perception has also gone up in view of growth in valuations in the recent rally.

It appears that the retail investors, who have so far gained from the small- and mid-cap stocks in the current bull run, have learnt their lessons from the past in terms of risk- relationship. A serious correction, in some of the small and tiny stocks, if and when it sets in, however, would test the maturity of the retail investors whether they are able to differentiate between paper profits or actual ones.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
India committed to stronger ties with France, says PM

Most power projects on track: Govt report

GAIL plans to monetise stranded gas in Bangladesh

Surprise! Nifty PE is actually 19

`No negative' is good news here

Pocket

Indo Gulf, Birla Global to merge into Indian Rayon — Swap ratio at 3:1; new company to be called Aditya Birla Nuvo

`Financial synergy, the driver of merger'

Stocks gain