The Hindu Business Line : Buoyant sentiment may boost benchmarks

It seems that even though funds from the US and Europe are cautious in their medium-term outlook for local equities, fresh offshore money flow may not stop.

A file picture showing a street sign in the foreground of the BSE's Jeejeebhoy Towers on Dalal Street seems to reflect the mood of the stock markets as the BSE-30 share Sensitive Index closed at an all-time level of 8889.03 points. The Sensex touched an all-time intra-day high of 8912.12 points on Saturday. - Paul Noronha

AS expected in these columns, the Dalal Street benchmark index, Sensex, surged ahead after a short correction last week. The index showed signs of strength even on an extended trading on Saturday. Backed by global liquidity, the overseas funds appear to have resumed fresh buying in Indian equities.

In the short-term, because of return of buoyant sentiment, the Sensex and Nifty are likely to move up.

FIIs still bullish: Despite suggestion by Merrill Lynch that local market has turned relatively overvalued, FII figures last week indicated increase in net investments. Overseas signals are that there are a set of investors, who are ready to give higher P/E multiple for Indian equities.

India-specific fund: Even as Indian benchmark scales an all-time high level, more and more India-specific equity funds are being set up.

In the first week of this month, a $171-country fund, set up by Al-Madina for Finance & Investment Company of Kuwait, officially opened for subscription.

This is the first equity fund from the West Asia to be dedicated towards Dalal Street.

The response to this fund is being keenly watched as a few others in the region are contemplating such funds for Indian equities.

After the successful launch of six India-dedicated mega-funds and growing interest in Korea, Taiwan and Singapore about Indian equities, it seems that even though funds from the US and Europe are cautious in their medium-term outlook for local equities, fresh offshore money flow may not stop. The Securities and Exchange Board of India data suggests that last week, after a few weeks of aggressive purchases, it looks as if the local mutual funds are slowing down their accumulation spree. However, a section of large domestic investors is still in the ring.

Resistance at higher level: According to analysts, the 30-share Sensex may go up by another 400 points before seeing a serious resistance, while a strong support should be available 300 points downwards. The 700 points range around the all time peak is decent enough elbow-room to hold the positive sentiment.

Not that rosy!: However, the overall market valuation does not seem so rosy. The last leg of the rally in the past three weeks saw majority of 9000-odd listed stocks lag behind. Many of the mid-cap pack are much below their 52-week highs.

How the Government handles the Opposition and the Left parties in carrying along some of the reforms measures would surely influence the market mood in the coming few weeks.

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