The Hindu Business Line : Citi bailout gives hope to Indian market players

Kolkata, Nov. 24 Dalal Street market players are hopeful that a proactive and quick bailout plan for Citigroup by the US Treasury, the Federal Reserve and Federal Deposit Insurance Corp would have a positive impact on local equity sentiment as another Wall Street crisis is contained and transmission of panic is stemmed in the short run.

But restoration of confidence and increase in risk appetite for global investors, according to some, may not come about until financial market situation and the real economy improve.

According to Mr Gul Tekchandani, an equity strategist, the sentiment ought to better slowly as it helps one to presume that if any more such crisis on Wall Street comes up in the near future, same level of pro-action could be expected.

Mr Ashith N. Kampani, MD of JM Financial, said it was surely positive for the short-term sentiment.

Mr V.K. Sharma, Director of Anagram Securities, also felt that theoretically, the bailout was a positive development for the local market but it has been seen that such developments were used more as an exit opportunity rather than pump in fresh flow. Mr Ajay Jaiswal of Microsec also echoed similar view.

‘Relief rally’

According to Mr Arindam Ghosh, CEO of Mirae Asset Management, it is always difficult to take a call on such development.

“There may be a relief rally, which may add to the volatility. But the apprehension that worst is yet to come still linger. The damage to system is already enormous. Moreover, the cost attached to such a bailout and the eventual burden on the economy may not be conducive to sustained comfort,” he added.

None seem to feel that FII flow would be impacted by the development.

Dollar weakening

According to Mr Amitabh Chakraborty, President-Equity of Religare, the monetary and liquidity actions by the US authorities have not yet caused a weakness in the dollar. But he expected the greenback to weaken against other currencies soon as a result of the cumulative burden of such bailouts. “A weak dollar can trigger a short-term rally on Dalal Street”.

Regarding FII money flow, he said that December 1 was the last day of the year for seeking redemptions from hedge funds.

“If redemptions are more than anticipated, hedge funds would be forced to sell in emerging markets like India.”

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