The Hindu Business Line : Sensex may maintain upward momentum

The results of the June quarter and the news on monsoon obviously will gradually determine the tone and tenor of the market trend in the coming three to four weeks.

THE stock market went into investments tactic changeover mode last week as was broadly predicted in these columns. A stronger money flow chased some of the benchmark indices stocks lending buoyancy to the BSE Sensex and the NSE Nifty.

The FIIs also finally turned their taps on Indian equities after about a month. Between May 31 and June 3, they poured in a decent net investment of Rs 814 crore. They also largely reversed their broad strategy in the Nifty futures through buying more than they sold.

On the other hand, the domestic MFs put a break on their heightened buying spree, as witnessed in whole of May.

As of now, the bulls and bears seem to be more or less on an even kill and thus, in terms of outlook, the market appears quite open.

The results of the June quarter and the news on monsoon obviously will gradually determine the tone and tenor of the market trend in the coming three to four weeks.

This week, the benchmark indices are likely to continue their northward journey on a steady stream of money flow. However, in the mid- and small-cap space, some profit-bookings led by mutual funds may take place.

But the overall appetite for stocks from various other sections of the market players is likely to help the market mop up the extra supply of papers.

Last week, Dalal Street attempted to grapple with the negative developments such as the prediction of the 34 per cent deficient rainfall in June and an apparent slow-down in the global metals demand.

On the other hand, prospect of an early resolution of problems in the Reliance backyard has been seen as a positive cue for the market sentiment.

No mathematical model, however, can possibly help the market in arriving at a quantifiable valuation, ascribable to the indices or individual stocks, emanating from such developments.

A perception based on monsoon forecasts, as always, remains essentially speculative. The premium and discounts placed on valuation of equities in relation to such perception dwell more in the realm of subjectivity than reality. However, as is wont, the market would not cease doing so.

The short-term trends that emerge from the global commodities markets are also targets of intensely speculative pressures from operators, much more than that in the equities markets over the world.

Similarly, wagering on whether the Ambanis will settle their dispute fast, based on incomplete information, and taking an investment decision on that, is again an act of tossing a coin. However, the reality is that market sentiment was swayed by such developments and will continue to be influenced by them in the future. Interestingly, the stock market may seem irrational but not insane. There is a method in punting. The big money normally draws or drives out small money. Thus flows the stock market everywhere.

There can be a debate about valuation of discounts on the Reliance group dispute or premiums on problem resolutions, or Chinese metals inventory pile-up, or the US demand of heating oil in the next winter in anticipation of a colder clime. Price discovery will emerge out of such a maze of "news" in the short-term.

In the long-term, what will stick out, are issues such as role of whistle blowers, corporate governance and free flow of information.

The justification put forward for the weakness in steel stocks last week is still not convincing enough in view of the suggestions by international commodities experts that the recent fall in the certain ferrous and non-ferrous metals is not based on fundamentals but gyrations of speculative positions.

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