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Jayanta Mallick

`No consensus among geographically diversified overseas investors'

HAPPY MOOD: Investors cheer at Lyons Range, near the Calcutta SE, last week after the BSE Sensex touched 11K mark. The index took just 29 trading sessions to create this milestone, after setting a peak of 10,000 points on February 7. - A Roy Chowdhury

Dalal Street seems to be divided over the short-term outlook (fortnight to a month timeframe).

A section of technical analysts feel that as the benchmark indices closed the last week above certain resistance levels, possibility of a further fall has waned considerably. Another group of chartists, however, insist that a deep fall is in the offing, maybe in two to three weeks.

Even for the medium-term, contrasting opinions guide the traders.

The perception of fundamentals and market valuation is also varying widely as market players generally tend to combine technical and fundamental approaches to draw up a trading strategy. Only in case of long-term, the opinions converge.

Writing on the wall

As anticipated in these columns, till Friday liquidity proved to be the dominant arbiter of the local market. Interestingly, investments by foreign institutional investors and the domestic mutual funds followed nearly an identical pattern last week - both net positive. This indicated that dips have been used for fresh entries.

The daily net investment figures also suggested a narrowed-down gap between the two sets of investors. But the similarity between the two does not end here. Despite having significant differences in overall scale of daily infusion numbers of FIIs against those of local funds, they both reflected caution and opportunism.

After setting an all-time annual inflow record in the first 10 weeks of the year emerging market equity funds sustained their first week of investor outflows in March since last November. More managers of the overseas fund vented scepticism regarding further upside for Brazilian and Indian equity markets in the short-to-medium term.

However, there is no consensus, as of now, among geographically diversified overseas investors who are looking forward to Indian equities market as a long-term bet. The first set has raised alarm and put India in the overweight category trying to resist fresh inflow. In market operation, they now prefer to either stay in cash or book profit.

But a group of optimistically cautious foreign players feel that this liquidity-witnessing market may only allow running corrections. So, using short dips are better ways to ride it than booking profit and leave a large part of cash under-utilised, they seem to indicate.

Bulls in India shop

According this school of thought, which has substantial following in the local fund community too, India's climbing valuation may not appear that high if the country's unique growth potential is appropriately taken into account.

On balance, it appears, this week Dalal Street benchmarks would be influenced by the bulls even as bears would continue to exert strong downward pressure. Mid and small-cap indices may fare better than the Sensex and the Nifty.

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