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Monday, Mar 15, 2004

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Oil, pharma stocks may help in recovery

Jayanta Mallick

However, this week, the secondary market is likely to look for insulations from the electoral calls and move according to its own intrinsic agenda of finding its short-term equilibrium.

ANYTHING newsworthy, from cricket to autonomy for IIMs to stock market indices, now seems to be linked to elections and packaged for encashment by political establishments on both sides of the fence. Now that the book-built disinvestments are over, the ruling clique at the Centre would like to bask in the shining glory (slightly modified by the apex court though) this week.

The Congress, on the other hand, will not take the Government and/or the market regulators to Court but harp on the alleged violations with regard to the BSE calculations of subscription to the PSU issues. Mr Kapil Sibal, Congress spokesperson and lawyer, told this writer that "violations of laws have been committed on various counts by the Disinvestment Minister, the BSE authorities as also the market regulator". Congress has also resurrected the issue of US-64 and loss to the small investors.

The CPI(M) leader, Mr Nilotpal Basu, who was a member of the Joint Parliamentary Committee for probing the stock market scam of 2001, said that his party was preparing a document to prove that the PSU disinvestments were being met for a song.

However, this week, the secondary market is likely to look for insulations from the electoral calls and move according to its own intrinsic agenda of finding its short-term equilibrium. The market's defensive prods last week addressed the questions of valuations. The key indices closed with an indication of recovery.

On the technical charts, the Sensex shows resistances ahead at 5780 and 5951 points levels. The information technology sector stocks may have left behind their downward phase.

Along with the oil sector counters, the pharmaceuticals sector stocks may start fetching attention gradually again. Focus on the mid-cap stocks, however, may take some more time to return.

Reduction in contract size for the 24 stocks and the CNX-IT index in the derivatives market would take effect from this week. This may prove to be a volume trigger for the stocks in the futures and options segments and also may have positive effect on its prices in the cash segment.

The FII investment figures last week indicated an interesting shift towards debts from equity. Except for two days, the net investments by FIIs in equities were below average (one day it was negative). On the contrary, the net investments suddenly jumped in the debts segment. However, some of the foreign fund managers insisted that the figures only reflect renewed interest in the debts and they were not at the cost of the equities.

After talking to investment officers of certain overseas funds, one gets the feeling that once allotment of the PSU shares begins, the qualified institutional bidders would start pumping in money. The likely scenario could be that after acquiring some shares, they would perhaps prefer to increase their holding in a particular stock through the secondary market, they observed.

If that is to be believed, the fund flow from FIIs and the domestic institutions this week towards equities may not be lower. A section of the retail investors may also show signs of return to the market fold.

The overall stock valuations in the market are likely to be reviewed by the investors in the coming days ushering in a consolidation phase. But return of a bull run will depend more on extraneous factors rather than on the fundamentals, which have remained in tact for quite some weeks now.

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