Business Daily from THE HINDU group of publications
Monday, Jan 15, 2007
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Business Daily from THE HINDU group of publications Monday, Jan 15, 2007 ePaper |
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Stock Markets Markets - Outlook Columns - A Ringside View JAYANTA MALLICK
Last week, we had predicted in these columns that the benchmark index might reflect the market hopes with more conviction than the previous week. Dalal Street did prove us right, sudden emergence of massive selling and short selling in the first three days notwithstanding. Those, who had short sold, were forced to opt for cover in the last two trading sessions of the week.
Gloom & boom
But why in the first place, everybody turned negative? FIIs were net sellers on the first day of the week to tune of Rs 3,076 crore. On the third session, their net negative figure was Rs 1,107 crore. Local mutual funds pumped out money worth over Rs 1,300 crore in the first four days. Interestingly, the global equity investment trend showed that risk had taken a back seat to returns during the first week of 2007 as the spread between US Treasuries and JP Morgan's benchmark EMBI+ index - a key measure of investor risk aversion - remained at or around record lows. The dedicated emerging market equity funds, tracked by the global monitor, EPFR, took in a healthy $2 billion during the week - the biggest net inflow into these funds since mid-May, 2006. On Dalal Street, the overwhelming apprehension among the market players in the first few days was that Infosys may not meet the expectations. Fall in copper and crude oil made the global hedge funds sell equities in emerging markets to offset some of their losses. As more investors went on a sale mode or hedged their risks, key indices breached crucial support levels creating a downward spiral. But improved Infosys results and a seeming stability in the commodities market in the later part of the week helped a quick revival. Incidentally, the smart recovery was lead by the large domestic players, who had largely short sold the index and the individual stocks. Dalal Street may have provided a laboratory situation to test the Oxford model, now made famous by Dr David Lamper of Oxford University, but from a lay ring watcher's point of view, one can simply say that the market behaviour was not one of a random walk. In the beginning of the week many traders thought they foresaw the weakening pattern and responded in the same way. To borrow Dr Lamper's theory, the market, in the process, collectively created a real pattern.
Back to fundamentals
This week may continue to consolidate on the improving fundamentals. If one trusts the hefty advance tax figures and growth in the industrial production, the corporate results are unlikely to disappoint the market. The growth prospect for the fourth quarter, when the government spending is at the fiscal's peak, should keep sentiment positively inclined. Though roller coaster ride is part of the Street show now, the short-term outlook for the key indices appears positive and liquidity play may be quite strong.
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