The Hindu Business Line : Smooth ride may continue

This week too, the liquidity flow is likely to have the last laugh in shaping the trend on Dalal Street. Select large and medium cap stocks may continue to get fresh institutional investments. The retail investors, HNIs and the rest appear to be more focused on the mid and small counters.

Apprehensions that the approaching advance tax deadline will mop up liquidity this week from the equity market and tilt the sentiment towards negative may be belied. The global money market scenario, marked by some pressure on liquidity, is also unlikely to affect fund flow to the local stock market. It seems that a flow of committed money-in-the-waiting is likely to override all other factors for the time being.

Investment behaviour

Local mutual funds and FIIs are likely to buy on every dip provided by high volatility, which is more or less assured. The deep pockets are still in cash and are looking for appropriate opportunities. The likely targets of fresh investments for the long-term institutional players could be power and engineering stocks.

Commercial vehicles and the frontline IT stocks may race past the benchmark indices this week in terms of performance. Market intelligence suggests, Wipro may report a new corporate development. The cement and banking stocks are likely to correct.

The mutual funds, particularly the open-ended ones, and the India specific overseas funds are likely to step up their buying in a group of roughly 50 medium capitalised stocks.

Global view

International investors appear to be unfazed by the rising P/E for Indian equities.

Even among the BRIC markets, Indian stocks are considered as defensive bets by the global investors.

The investment trend indicates that amongst the emerging and the Asian markets, India still shares the limelight with South Korea and Japan.

Despite alarms of a serious correction in the Indian market, which begun to ring from the second week of February, the overall FII investment flow have not come down.

In turn, it has prevented a correction.

Domestic mutual funds, as anticipated, last week increased their net investment level against the previous week. On Wednesday, their net figure touched a record this year at around Rs 484 crore.

FIIs, particularly the long-term ones, also gave clear indication that they are buyers at higher levels on the Sensex or the Nifty.

At a relatively lower inter-day or intra-day level, they are more aggressive than usual.

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Smooth ride may continue