The Hindu Business Line : Market betting big on Infosys numbers

Remaining in the vicinity of 14K, the Dalal Street benchmark index last week managed to keep up to expectations. This week, the BSE Sensex may reflect the market hopes with more conviction.

The third quarter result and guidance by Infosys, slated on Thursday, is expected to throw up a positive surprise. Blue chip tech stocks are likely to be the flavour of the week.

The first week of the year saw the market makers turn the green light on. Foreign institutional investors kicked off 2007 with a net investment of Rs 3,353 crore.

Of the four days of trading, they were net positive on three days, while mutual funds in the first three trading sessions put in Rs 164 crore.

If crude prices breach the support level of $55 a barrel, equities market may cheer up further.

Are investors becoming overoptimistic about the Indian economy and equities? At P/E of 23, historically and comparatively speaking, the Indian bellwether seems to be fair-valued.

Prisoners of hope

But, the local and global investment fraternity appears to be fully geared up for a new valuation regime in tune with the unfolding economic order and corporate performance.

Differences of opinion and lurking suspicions notwithstanding, the Indian equity market is ready to walk the growth street this year too.

To many outside Dalal Street, globalisation and growth still seem like a pact with the devil. The call for an inclusive growth from Dr Manmohan Singh is to address that concern. However, as the economy fires the second stage reforms rockets, resistances are likely to grow in geometrical progression raising further doubts about achieving and sustaining a dream double digit growth.

In the new emerging order one expects the largest to get the lion's share of the pie, but the political and business elite in this democracy does not seem to have got over the dilemma with regard to the distributive road ahead for the rest. Row over land use or liberalisation related to foreign direct investment is likely to test the sensibility of the politicians, business groups and planners alike. Education, ecology, law and order, criminalisation of politics or politicising the police may become part of the same socio-economic agenda.

The stock market, of course, is counting the chickens and not just the index numbers.

For global investors India had been among incredible destinations in 2006. Partial capital market liberalisation was overwhelmingly responded to despite increasing risk. The domestic investors also played the game. The equity market supported the seeming economic buoyancy and improving corporate performance without major hiccups or scams. New Delhi drove home the Sensex points well.

Lessons, for the market players, however it seems, may come hard way this year as volatility is likely to increase and the returns may drop. Political grandstanding may also cloud the economic play going forward testing the commitment of the reportedly long-term investors.

Deep cleansing

The market regulator has been able to orchestrate an orderly growth and protect interest of the investors. In 2006, the SEBI has quietly put in place a new team that now monitors the Street on real time basis.

2007 may witness the regulator cleanse the market with more aggression.

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