The Hindu Business Line : Market may see a bout of upward movements

Last week, there were attempts to overcome the negative sentiment by a few players on the equity street through sporadic buying or short covering. But, the traded volumes could not signal the beginning of a fresh momentum.

Psychologically, the market has entered into a drift mode. In this situation, valuations can significantly change either way despite low volumes. In a way, this is, of course, better than the recent panic, but does not throw up any serious indication for the direction — even for the short term. This also signals that the long-term investors are yet to enter the ring.

The strategists appear to be more focused on the price actions rather than on the fundamentals. A great deal of recent institutional activity has been geared towards churning of portfolio and profit booking — the defensive moves.

Corrective phase

Technically, Dalal Street has not witnessed a ‘flight of liquidity’ in the present corrective phase. But money has been taken out and stacked up on the sidelines. According to market sources close to overseas institutions, no one has called quits on India in the last four months of registering real profits from Indian equities.

However, as long as redeployment does not occur, a return of momentum might be postponed. This week, the market may go through a bout of upward movement in the beginning and ignore international cues, even if they are negative. The sentiment booster could be the possibility of bonus shares from Reliance Power.

However, whether the initial cheer would last for some more time is a matter of conjecture. According to market intelligence, major players want to wait out for a little while. But this move from Mr Anil Ambani might give the market makers an opportunity to kick-start broad moves.

Considering that the Union Budget is not far off, this could also provide a tentative base for a short rally. This might mean that the market could shift its range a little forward in terms of the benchmark index.

Instead of a range between 16,000 and 18,000 points, the Sensex could traverse a new range between 17,000 and 19,500 points.

However, the Budget proposals for 2008-2009 would be crucial for the eventual direction of the market in the medium-to-long-term. In ways more than one, the market had gone ahead of the economy. But this is a hindsight view. A bull market never stops, factoring in future growth. It also goes through a readjustment process, at times painfully.

The fiscal and monetary policies in the immediate term are likely to provide necessary signals for a new directional call on the market. Significant liquidity and momentum are likely to follow once the market breaks out of the current drift phase. Very few deny that the Indian equity is still a golden goose among potential black swans. But, as the story goes, greed needs to be tampered to get the return.

(Responses may be sent to jayanta_mallick@thehindu.co.in)

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