The Hindu Business Line : At 6K, Dalal Street at crossroads

This week, there is apparently no reason for market to develop fresh weakness, except to let a technical correction to happen. However, the average mindset does not seem to favour to increase the risk appetite dramatically.

IT is like a toss of coin this week. There are a whole host of psychological imperatives, which stop the market from taking a decisive turn. The marketers of bullishness still suffer from lack of conviction.

The climb above the 6000-mark on the Sensex has historically been quite unnerving for the existing players including investment officers of overseas outfits. Even though the feel-good factor lingers on and the India shinning tends to overflow its domain of strictly political lexicon on to the corporate economy, doubts seem to overpower the investors regarding the management of economy and the India Inc. Structurally, the market has not been tested to bear the burden of height clearly above 6,250, the last peak scaled on the Sensex.

It is also a test for the regulators, who have been engineering the structural changes in the market and making it safer. However, issues involving valuations, corporate governance and regulation of liquidity including leveraging mechanisms are evolved and get streamlined as the market moves along.

The institutions and the investors, who have been suggesting that the future growth potential of the Sensex is much beyond 6,000 points — some did not hesitate to mention 8,000 or 10,000 points in a period of couple of years down the line — appear to develop cold feet when it comes to making an investment call.

The overall market volume is continuing to be low, reflecting caution and indecision among the investors. Five sessions last week saw FIIs make a net investment of Rs 1,151 crore compared with Rs 264.80 crore in the four sessions in the previous week.

The mutual funds this month are carrying a net negative investment figure of Rs 182.77 crore till February 12. They were net sellers on the first three days last week.

According to technical analysts, the key indices have shed some of their weaknesses in the last couple of weeks, but do not appear to be chartbusters. The Sensex closed the week higher, but not above the 6030-point level to clearly confirm a further upswing. The Nifty finished way below the crucial resistance level of 1990 at 1914.

The first and the last days of the trading week are generally important for getting directional clues for the major indices. However, since this is an accepted market practice, it is vulnerable to manipulation. Market operators often take advantage of the scrip weightage to camouflage the undercurrent.

To some the concern seems to be that the onslaught of forthcoming primary issue may mop up liquidity from the secondary market. However, if one takes into consideration the huge money technically waiting on the sidelines for a higher return, this argument does not seem to hold ground.

The pre-poll scenario may provide excuses for both the bulls and bears. But who sticks out the proverbial neck with force will determine the market direction this week. A draw is the likely scenario, which will leave the market poised around the all time high. The return to the lower camp may occur a couple of weeks later. The market mood is to survive for now and prepare for another day to scale up.

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