Financial Daily from THE HINDU group of publications
Monday, May 15, 2006
Markets - Outlook
Columns - A Ringside View
Left's ascent on the power ladder
Interventionist practices of the Government and its allies
FIIs and local mutual funds were heavy sellers on Friday
After Friday's closing, week-on-week, the Sensex has lost only 75 points. According to available SEBI data, FIIs were net negative by less than Rs 10 crore (Rs 9.20 crore, to be precise) in the period between last week's opening and Thursday's closing.
Domestic mutual funds made a net combined investment of Rs 441.04 crore within the same timeframe.
But, some of the Dalal Street commentators gave an impression as if the fall in the last two sessions of the week was something of a setback.
Blame it on the Left
The sentiment readers, in their justification on Thursday, apparently felt that the Left's ascent on the power ladder was a dampener.
However, on Friday, the Centre's pressure on the cement industry to reduce the prices was cited as the principal reason for another bout of fall.
It would not be surprising to find a quote or two, suggesting that the Government was acting on the Left's prompt on this issue too.
After all, Left's well-known opposition to increasing retail price of LPG and kerosene is a ready (simplistic?) example at hand. In essence, some of the analysts and market players questioned interventionist practices of the Government and its allies. This is part of a primary debate in a transforming economy and a democracy at that.
Fair enough, but is political bias of some being foisted as a free economic opinion? Did the market actually slide because of the reasons aired by some in the media?
Assumptions are too many. Even if it is assumed that FIIs and local mutual funds were heavy sellers on Friday, it is difficult to digest that they booked profits as a coordinated strategy.
It may be further assumed that herd psychology may have accentuated the trend.
At the end of the day (or week), the market sentiment has been impaired in the immediate term.
Though, historically and behaviourally speaking, stock market's perception towards anything essentially political has never been constant, it would be perfectly in order if investors decide to go slow and take profit in the short-term perspective.
Tactically, the investors would like to watch how the Government handles the cement price issue this week.
Earlier, similar attempts to tame the steel prices were made and the market responded by adjusting prices of the steel related stocks in the short-term.
The market has already learnt to value the Left's power equation factor in the last few years as it did for the Right.
Semantics apart, economic decisions influencing the corporate profitability will always sway the specific stocks, not necessarily the overall market.
Eventually, the flow of money would determine the weekly direction. It may be just a matter of time and timing for the smart investors to use the opportunity and reverse the market gear, in the process.
Robust funds' flow
According to the latest global and local funds data, the quantum of flow to Indian equities continues to be robust and the average cash to invested-fund ratio is still very favourable to ensure a mid-to- lo ng-term positive outlook for stocks across several sectors including construction, real estate and infrastructure, where cement is the cementing factor.
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