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Monday, Feb 18, 2002

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`Feel good' factor back on bourses

Ambarish Mukherjee

THE feel good factor seems to be coming back in the capital market. A stream of good news such as the disinvestment of public sector units, Budget expectations and soft interest rates are the primary reasons.

Lowering of tensions across the Indo-Pak border and the diplomatic benefits accrued in favour of India following the Pakistan President's latest bid to accuse India of another nuclear test during his US visit also had a positive impact on the feel good factor that ruled high on the market when it closed last week.

According to Mr John Band of ASK Raymond James, ``the run-up to the Budget is good and the trend is positive. There may be some days of correction during the run-up but overall, sentiments are likely to remain buoyant.''

The trend of heavy buying in PSU stocks may continue for some more time in the case of BPCL and HPCL, Mr John said adding that there might be some serious buying interest in select automobile stocks in the coming week.

Regarding the tech stocks, chances of any excitement are not very strong at the moment. In fact, tech stocks could hog the limelight again only after March when results start coming in, feels Mr John.

An official with the UTI's investment division, however, feels that there could be a technology-driven rally around the end of the week, which could continue till the Budget.

``February 22 onwards, one might expect the market to move up and reach somewhere near the 4000 level with tech stocks leading the rally. The first signals of a possible revival of the US economy have started coming in and it is expected that by June/July, there might be a confirmation that the downturn is finally over. So now may be the time to make some investment buying and enter some of the tech stocks, though selectively, and others, which are heavily undervalued. The euphoria about the PSU stocks has possibly ended,'' the official said.

The mutual funds too are expecting a rally as expectations are building up and already there are indications that the Budget may allow another three years' tax exemption for equity schemes.

According to Mr A.P. Kurien, Chairman of the Association of Mutual Funds of India (AMFI), "expectation is building up that the Budget would bring in some measures to strengthen the capital market. During the last one year, the market remained weak and subdued almost touching the bottom. I think the market is poised for a turnaround. The negative factors like the Indo-Pak border conflict seem to have already been discounted and the overall situation seems to be improving with the US economy showing symptoms of coming out of the recession.''

According to Mr Dhirendra Kumar, Chief Executive of Value Research, the firm which tracks the capital market and investments made by mutual funds and institutions, ``the equities market is likely to remain positive in the coming week also. A series of small positive changes is bringing back the feel good factor in the market. Actualised PSU disinvestment, Budget expectations and lower rates drive optimism.''

"As far as the debt market is concerned, the bond rally weakened at the close of the week primarily because of the technical glitches and the teething problems of the new automated bond trading system (ABTS) introduced this week by the Reserve Bank of India. Though it had a negative impact on the very first day when traders took time to understand the system, this impact is not likely to be sustainable,'' Mr Kumar said.

Bharti Televentures, which is slated to be listed on Monday, is a much awaited event but marketmen feel that due to increased competition, retail investors' profit expectations may not fructify in the short run. Brokers estimate that on listing, the scrip may be quoted between Rs 50 and Rs 60 but will soon settle at a level below the issue price of Rs 45.

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