Financial Daily from THE HINDU group of publications
Monday, Jan 23, 2006
Financial Daily from THE HINDU group of publications Monday, Jan 23, 2006 |
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Stock Markets Markets - Outlook Columns - A Ringside View Dalal Street at critical stage Jayanta Mallick
DOMESTIC market makers took control of the steering last week and lead it to a recovery road. This happened at a time when FIIs and mutual funds were not keen to assume the driver's role. As a result, the benchmark indices along with broader averages bounced back to indicate a vote of confidence in sustainability of the corporate profit growth. Last week, the overseas money flow was positive, though the strength of net incoming liquidity was not enough to lend a direction for Dalal Street. Mutual funds, on the other hand, pumped out money from the market. Emerging markets' still attractive: Local market operators took the forward bet on the assumption that overseas fund flow would grow shortly. Money flows into the emerging market equities funds, particularly for the BRIC (Brazil, Russia, India and China) has been robust of late. Funds tracked by Emerging Portfolio Fund Research (EPFR) set an all-time weekly flow record of $3.22 billion in the week ended on January 11. A significant part of the earlier record flow of $1.87 into the emerging market funds in the first week of November 2005 had come to Indian equities. Several overseas fund managers located in New York, London, Tokyo and Singapore suggested that now the flow towards Indian equities seems turning torrential. Confidence level high for India: A fund manager of India-dedicated fund launched recently in Japan told this writer that comfort level for Indian market appears greater than other BRIC markets. The level of confidence reposed on the Indian equities could be gauged by the support from all corners. Investors were surprised to find Mr Goh Chok Tong, former Prime Minister of Singapore, forcefully advocating in favour of steering investments into India at a conference organised by Nomura in Japan a few months ago. This week, it would be a test for the local market to prove whether the short-term consolidation is over. The sustainability of the Sensex level at 9,500 points and 2,900 points level on the Nifty is crucial for the overall valuation. Who are the buyers to give a P/E of 20 or more for India - could emerge this week. Crude to dictate direction: The current bull phase in the Indian equities market had been encouraged largely by the liquidity from abroad. Despite concerns over nearing limits in the recent months, premiums were added on. In the short-term, the rising global crude oil price could play the spoilsport. Unpredictable and unavoidable as it is, the stock market players do not want take a presumptive call on any negative development in advance. But if the international petro politics turns sour, local stock market investors or speculators would be hard pressed to retain sweetness of the sentiment for equities in the immediate term. The volatility is predictable in blue chip stocks, as they stand vulnerable to fluctuation in sentiment and liquidity. It is also plausible that some of the mid-cap stocks would continue their journey towards their all time highs. Even in worst of circumstances, the weekly range of either way movements in the benchmark Sensex is unlikely to go beyond 500 points.
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