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Jayanta Mallick

In the first phase, from April 28 to September 9, it was seen that broader indices outperform the Sensex because of large participation by retail investors in the mid- and small-cap stocks.

THE key indices are showing signs of vertigo. Though the BSE Sensex and the S&P CNX Nifty finished last week in the green, the broader indices showed much more resilience in scaling newer heights.

Going by the favourable advance-decline ratio and emerging preference of retain interest for mid-cap stocks, this week the broader indices are likely to outperform the benchmark indices. As FIIs applied brakes on their flows, the market turned cautious about the Sensex and Nifty baskets.

The FIIs were net buyers last week, but the last two sessions saw their net investment figure droop. From the highest net investment figure of Rs 598 crore on last Wednesday, their net figure slipped to Rs 134 crore on Friday.

In the derivatives segment too - both in index futures and stock futures — FIIs sold more than they bought. The mutual funds finished net negative, indicating continuation of their profit taking spree.

Incidentally, five stocks - ONGC, Bharti Tele, HDFC Bank, Tata Power and Wipro - would make entries into the Sensex basket this week replacing Nestle, Glaxo, HCL Tech, Colgate and Castrol.

This change in complexion may smother a possible downward correction in the Sensex. Some quarters suggest that the Sensex may shed 5 to 6 per cent in the next few weeks.

In the derivatives segment, the volume based put-call ratio (at 0.29) still signalled bullish disposition of the market at the close of the week.

It is interesting to note that the seven-month-old rally has witnessed three distinct phases of playing with different baskets of stocks by the investing community. In the first phase, from April 28 to September 9, it was seen that broader indices outperform the Sensex because large participation by retail investors in the mid- and small-cap stocks.

From September 10 to 19, saw a phase of correction when the Sensex along with other indices slumped. In the second leg of the bull run resumed again from September 19. In this phase, the Sensex gradually overtook the other indices as FIIs moved in a big way for the heavyweights. A third leg seems to have begun from November 4, which indicate a role reversal among the indices, as small investors, who went over to sidelines in the second phase, are showing indications of a return.

In the first phase, the Sensex moved up by around 54 per cent, while the BSE-500 progressed by around 69 cent. In the second phase, the Sensex notched up a gain of about 25 per cent compared with around 24 per cent of the BSE-500.

But in the current phase, the Sensex declined by 3.18 per cent, when the broader index slid by just 0.29 per cent.

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