The Hindu Business Line : Volatile market looks for liquidity to gather steam

THE Sensex, the hallowed benchmark, last week created an all-time high, but failed to explore further in the uncharted territory as oversupply washed down the achievement in the first flush of reaction.

Both the key indices, the Sensex and the Nifty, were tossed up and down through week and managed to close 1.54 per cent and 1.33 per cent gain week-on-week.

The FIIs, though were net buyers on all the trading days last week, their net investment figures came down sharply from a level of around Rs 500 crore on the first day to Rs 155 crore level on the weekend because their gross sales figures shot up by the day. The mutual funds were net sellers on two sessions, out of the first four sessions last week. The local bull operators, traders and retail investors also, by and large, did not swim upstream strongly enough.

The preferred outlook for this week appears to be — what in the clichéd market parlance is called — cautiously optimistic. The seemingly random occurrences, such as better than expected corporate results, unexpected boons from the Government and yawning gap in fiscal deficits, are giving rise to a new market order where volatility is a yardstick of divided confidence and pricing exercise is more a function of liquidity than classical interplay of demand and supply.

The given situation is tricky. The top rung stocks are costlier than they used to be when indices were at lower levels. The so called mid- and small-cap stocks have also been valued higher in the past leg of the bull run.

Whose call it is anyway: All eyes are again turned to the FIIs, the current market makers. This breed of investors are expected to revalue the market — push the Sensex beyond 6,250 points and bulwark the sentiment to let the other stocks to bask in the reflected glory.

Even though the home-grown analysts have been airing their confidence over a long-term bull phase in 2004-05 for the domestic market in relation to global earning benchmarks, local investor fraternity is still not able to muster enough courage in feeling good in the higher altitude.

Zen and market mechanism: Intuition and timing are essence of Zen, politics and stock market. If the political establishment's outpouring of bounties to industry, agriculture and common taxpayers were unmistakably timed to an intuitive assessment of poll prospects, profit taking by the proclaimed long-term players was a reflection on their sense of timing, and identifying positives for stock valuation.

This week, market may see sharp inward and outward price spikes depending on third quarter results and overseas money flow. But the key indices are likely to average out the sharp swings intra-day and inter-day during the week. As stakes are getting increasingly higher, the market may adopt a slower pace in moving either way. After the results season, a phase of consolidation beyond 6,250 points on the Sensex, is a plausible scenario.

Lord of the ring: Before the plains are reached, the strategy, according to a general consensus among the seasoned market players, is to remain long-term and monitor short-term. If one declares one self long-term sans the determination and vigil, this market may prove to be pretty tough.

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