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Jayanta Mallick

The absence of long-term domestic investors, who can play the role of contrarians, was felt strongly once again during the crisis.

THAT an after-shock or a series of after-shocks always follows a massive earthquake may not necessarily be transposed onto the stock market floors.

This week a process of recovery in the domestic market may be underway because of derivatives compulsions as also dissipation of uncertainty on the political arena.

The crisis management paid off last week. The systemic lacunae that may have been behind accentuation of the crisis on last Monday are reportedly under searchlight.

The elements such as margin trading and programmed trading are in for a review. The suspicion over market manipulation, unless proved, may just vanish into the domain of Street folklore.

Das Capital market: Dalal Street in the past one year had heard whispers and cries over such alleged manipulations. Much ado about influence on the sentiment over Left's call on disinvestments and social safety net apart, the heavy selling binge by the FIIs has pointed out that the stock market essentially skates on a thin ice of perception.

One systemic element that came to the fore was liquidity of the brokers. In a severe crunch situation, brokers should have the greater elbowroom. May be a system of regular line of credit to brokers against collaterals could be considered by the authorities.

In the market circles, a proposal of establishing a market stabilisation fund, like in the bond market, is doing the rounds.

Incidentally, the NSE has received accolades from an international body of regulators for successfully handling a situation arising out of a historic fall in the top indices.

However, absence of long-term domestic investors, who can play the role of contrarians, was felt strongly once again during the crisis.

Last week's panic did not, however, cause a serious redemption pressure for the domestic market mutual funds but only brought out retail investors' temporary preference for other instruments against equity.

With a new Government in place, monsoons knocking on the southern doors, the common minimum programme ensuring continuity in the economic programme, the better economic fundamentals than many in the emerging markets and good corporate results in the background, the equities market this week is poised to be back in favour.

Though the view of FIIs about the emerging markets has taken a knock in the past few weeks, India may prove be to be an exception. Overseas funds may turn buyers than sellers this week.

Twist in the tail: The derivatives market near month contracts is to expire on Thursday. According to the indications, the short sellers of Nifty futures may try and cover their positions during this week. The Nifty May and June futures were quoted at substantial discounts to the spot at Friday's closing.

Interestingly, the June Nifty futures closed lower than the May index futures. The position rollover on Thursday's closing is likely to indicate continuation of a cautious outlook.

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