The Hindu Business Line : A bull in bear's clothing?

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Chennai March 7 Large and widespread declines in Sensex stocks have, in recent times, been accompanied by increases in turnover and in the number of shares traded. It would seem that, under such conditions, bulls lie in wait, ready to devour the bears.

The decline in share prices was both large and widespread over the last 10 working days (from February 21 to March 6). Only twenty of the 500 CNX stocks registered a rise. As many as 297 fell 10 per cent or more, 131 of these (including 4 Sensex stocks: Bajaj Auto, Grasim, Tata Motors and ACC) by more than 15 per cent.

The Sensex, Nifty and CNX-500 fell by 10.5 per cent, 10.75 per cent and 10.8 per cent respectively. But CNX turnover increased only 6 per cent from a one month average of Rs 99,000 crores a day to a 10-day average of Rs 1,05,000 crore per day, while the quantity of shares traded fell marginally from 3.7 to 3.6 billion per day. This suggests that supply is falling short of demand at the lower prices. There are more people willing to buy than to sell.

This is also true of shares of banks and finance companies. Their prices have fallen across the board, in many cases sharply.

But in most cases volumes have been thin. Bears do not seem to be in a hurry to allow bulls to feed on them. Sensex stocks, however, have been treading the beaten track. Average daily turnover and trades over the ten working days since February 21 stood at Rs 5267crore and 96.4 million respectively; 40 and 60 percent above those prevailing earlier this year, when the Sensex was on its way up. Clearly many small and/or institutional holders, probably the former, who are usually less well-informed and often not as street smart, are tumbling over themselves to sell, while there is no dearth of people willing to lap up these shares as fast as they become available.

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