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Monday, May 20, 2002

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Markets send out gloom signals

Jayanta Mallick

THE sentiment in the stock market dipped last week following escalation of tensions between India and Pakistan. According to market players and analysts, the spectre of a war-like situation is likely to keep the market depressed this week also.

The arrest of Ketan Parekh and the spreading tentacles of the Government securities scam had also queered the market pitch. "Before the Gujarat issue could be resolved satisfactorily, uncertainties crept in from different corners. On the whole, the market mood turned sour and a seeming sense of well-being that was about to return, evaporated fast," observed a Bombay Stock Exchange broker.

These developments had an adverse effect on the trading volumes too. "Foreign institutional investors have already recoiled and the mutual funds and domestic institutions have turned marginal players in the prevailing scenario. The traders, operators and high net worth individuals, who have been keeping the market afloat, have started showing signs of fatigue," a National Stock Exchange broker commented.

The bargain hunters, both retail and wholesale, appeared to be discreet and risk-averse.

The general impression in the market is that the divestment process has not gathered enough momentum and is being punctuated by hiccups. Even though the market speculated a highly leveraged bid by Reliance for IPCL, it failed to lift the sentiment. However, it could lift the prices for both IPCL and RIL stocks.

The reported negative observation on the divestment of Bharat Petroleum Corporation and Hindustan Petroleum Corporation by the Parliamentary committee paved the way for possible price discounting in the two counters this week. "If the divestment process loses steam, the valuation unlocking exercise in PSU stocks would come to a grinding halt," a Calcutta Stock Exchange broker pointed out.

Last week, the stocks of Shipping Corporation of India, Bharat Electronics and Bharat Earth Movers were among the movers. The rising trend in the international freight rates and divestment moves have been behind the SCI gains. The market positively inclined towards BEL and BEML because the companies have been awarded certain defence orders.

Sectorally speaking, technology stocks remained in the negative zone. In the domestic market, the pharmaceuticals and auto sectors have shown improvement in fundamentals and witnessed selective growth last week.

The value-picking exercise in medium and small-capitalised stocks is likely to continue in this fashion in tandem with the economic and political jitters in the near future, according to market analysts.

Some analysts felt that though institutional investors abroad generally perceived that Indian stocks are undervalued, the current perception about India as an investment destination appeared negative. It is reflected in portfolio investment strategies of FIIs.

For direct investment, the thesis would be tested in the forthcoming bids from foreign companies for HPCL and BPCL.

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