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JAYANTA MALLICK

Global, Asian macro-economic clues point to high degree of volatility

Mr Warren E. Buffet is yet to enter the Indian market. However, Mr A.K. Jain, who heads several businesses of Berkshire Hathaway, is reported to have taken a close look at the oil companies, including ONGC. But the Oracle of Omaha is yet to invest in any of them.

His investment in PetroChina, one of the major ones outside the US, is of late causing him enough unease. On May 5, at the Berkshire AGM, a shareholder-sponsored resolution, which called for Mr Buffett's holding company to sell its 1.3 per cent take in PetroChina, was defeated. But the activists and a strong divestment coalition of advocates are determined to keep the pressure on Berkshire over the issue.

Some seven US states, a dozen pension funds and universities, including Harvard and Yale, have divested in PetroChina because of an alleged link with Sudan, which the US has accused of letting genocide take place on its people.

CNPC, PetroChina's parent, has a 41 per cent stake in Petrodar Operation Co, which is active in Sudan. ONGC Videsh and Petronas, which have substantial oil equities in Sudan too, may also face pressure from the expanding international campaign against the alleged killings in the African country.

Tricky game

Investing in the emerging market equities is often complicated and the opportunities for reducing the risk are relatively limited. According to EPFR, money flows into the emerging market equity funds ground to a halt during the week ended May 2 as the struggle over the Turkish presidency reminded international investors of the risks associated with this asset class.

Though long-term global players now reckon Dalal Street as less risky than the most, issues related to macro-economic stability and socio-political compulsions of a democracy have drawn fresh attention of the asset managers.

In the eight sessions this month so far, the FIIs have been net positive in their investments on five occasions, but the quantum of money pumped out in the other three was more than the purchases. Sporadic contrarian attempts by the local investors, such as mutual funds, institutions, banks, insurance companies and HNIs, have kept the local indices bound within a range.

Recently, Moody's Investors Service has cautioned that in the absence of deeper reforms, Indian fiscal policymakers have few options but to rely on stopgap measures to contain macro-economic imbalances and inflationary pressures. It said that the current efforts merely address the symptoms rather than the underlying causes of supply shortages and price pressures.

Though Indian key indices are currently much below their all-time highs, according to Mr Ajay Jaiswal, investment strategist at Angel Broking, in dollar terms, they are still close to the peaks. This is also one of the reasons for the present caution against fresh buying and pushed investors towards profit booking at higher levels.

Bound by trading zone

This week asset managers are unlikely to change their watchful stance, marked by caution and emphasis on hedging the risks. Global and Asian macro-economic clues are also likely to be somewhat worrisome favouring continuance of high degree of volatility in the equities, currency and metals markets. As a result, the Dalal Street indices may move within a trading zone.

A large number of market players seem to be in no hurry either to aggressively push valuations forward or backwards. Many of them prefer to remain on the sidelines in the near-term than jump on to the ring as the day-traders slog it out.

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