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Jayanta Mallick

THE meeting of the Cabinet Committee on Disinvestment on Saturday which had earlier cast a shadow on the market indices finally dealt a heavy blow to the stock market indices and made sure that market capitalisation worth a few thousand crores of rupees are knocked off early this week.

The Sensex, which lost little more than one per cent last week, could well end up this week between 2,950 and 2,970 points, most of the market players foresaw.

"In the immediate term the sentiment will be influenced adversely by the Government's posture over the privatisation of Hindustan Petroleum Corporation and Bharat Petroleum Corporation," said Mr Ajit Day of Dayco Securities.

"Thank God, the market had the hunch last week and on the week-end substantial open positions were reduced," Mr Day added.

According to Mr Vivek Mahajan, a technical analyst, the Sensex is likely to slip on Monday. On Friday, the PSU stocks on the charts showed distribution at the top signifying shift towards weaker hands "The market does not show any breadth right now and heavyweights along with tech and PSU counters may witness a substantial correction this week", Mr Mahajan predicted.

According to him, the privatisation process had proved to be a positive trigger for the market in the recent times amid negative developments such as Indo-Pak tensions, riots and poor monsoon. A section of the market participants felt that though the macro-economic compulsions tended to push the Government towards disinvestment, narrow considerations had come in the way.

A senior National Stock Exchange broker was of the opinion that the sudden strident opposition to the privatisation process was prompted by an interest to accommodate a prospective domestic contender for the oil PSUs. The intending bidder needed some time to garner funds, the market player maintained.

According to Mr Abhay Aima, a market analyst, the market may not like the indecision on the part of the Government. The deferment of HPCL and BPCL divestment would affect the sentiment for the PSU sector as a whole and particularly for the stocks of the oil companies.

"But, I believe this would be momentary. My personal view is that there could be a distinct shift of interest to infotech and pharma stocks from the PSU sector. In terms of top indices, this will balance out losses due to the confusion over the privatisation process this week. In fact, after an initial dip, there may be a recovery in the Sensex towards the end of the week," Mr Aima observed.

The other negative factor for the stock market this week could be upward movement in the crude oil prices — both spot and futures in the wake of possible Anglo-American strikes against Iraq.

"The developments have to be watched. The weekend crude prices were below $30 a barrel. The Indian oil companies and refineries generally maintain a forward cover for a quarter. So they would remain insulated for some time. But an outbreak of a sustained war is likely to hit the Indian economy and the stock market," Mr Aima felt.

Mr John Band, an independent analyst, thought if the international crude prices moved up quickly towards the region of $40 a barrel, India could see a serious trouble. However, Mr Band felt that was an unlikely scenario, as Russia would start pumping in more oil if the global crude prices went on a significantly upward mode in the short term.

Both Mr Band and Mr Aima were of the opinion that the real problem for the stock market was the absence of fresh money coming in — either from foreign funds or from domestic sources. Mr Band felt as long as the tax issue was not resolved, substantial FII money could not be expected.

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