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Jayanta Mallick

For a long-term investor, this is an ideal time for a well-researched investment decision, as the overall market's fundamentals still remain positive.

THE tactical warfare and the battle of nerves are no less important in the stock market. Three sets of big players — FIIs, domestic institutions and mutual funds — suddenly changed war plan last week. The casualties, though limited, were on the side of the short-term players including individual investors and traders.

Indications of a change in the strategy were in the air. That the market may go in for a substantial correction prompted by a profit-taking spree, was suggested in this column last Monday. (During the full trading week between October 13 and 17, FIIs had sold the Nifty futures more than they bought.)

The MF, who had turned net sellers in September and were buying and selling at a lower scale in October, last week stepped up their selling compared to buying. As a result, the net selling figure of the MFs stood at Rs 353.25 crore for the week. The pronounced profit-taking last week was evident from the fact that the total net sale figure for the month (till October 23) was Rs 434.51 crore.

However, the daily investment trend of MFs showed a slowing down in the net negative investment figurers. The FIIs, though finished the last week as a net buyer, their net investment figures progressively declined. From Monday's net positive figure of Rs 535.80 crore, FIIs net investment turned negative on Friday at Rs 87.50 crore.

In the derivatives segment also FIIs continued readjustment in their activity pattern for the index futures, namely sold more Nifty futures than they bought. However, for the stock specific futures, their buying overtook selling on Wednesday and Thursday.

As around 80 per cent of the current fund flow is contributed by the overseas outfits, their strategy is likely to influence the market most. They have timed the temporary exit well and foxed some of the seasoned domestic hands.

The Samvat trading on Saturday, without domestic institutions and MFs, was not indicative of the market direction this week. It was a mere echo of Friday's recovery, which was prompted by domestic and foreign institutional players. Interestingly, some of FIIs reportedly sold on Saturday through overnight orders to their brokers. The fact that the domestic operators have largely been marginalised in terms of deciding the market direction was evident last week.

The week, FIIs are unlikely to reverse their strategy. Their focus would be more stock specific than the index futures.

With results season almost over and the PSU disinvestments story getting colder by the day, they may prefer to be rather low key. This will let the market move somewhat sideways. But the operators and traders would try to push up the indices. In view of expiry of October derivatives contracts, the volatility, however, is almost assured.

For a long-term investor, this is an ideal time for a well-researched investment decision, as the overall market's fundamentals still remain positive.

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