The Hindu Business Line : With election round the corner

THE secondary stock market last week recovered well enough to be able to look beyond the issues in the primary market this week. The liquidity, which got tight a couple of weeks ago, also showed signs of improvement. However, in the pre-election time, the stock market always tends to make moves in a guarded fashion.

The domestic mutual funds and institutions, which are playing third fiddle, are likely to be cautious in terms of revaluation of stocks this week.

One gets an impression, after talking to several fund managers of this segment of the market players, that if a certain stock's re-rating is not exceptionally compelling, they would rather book profit than extending their exposure further at this juncture. But this does not mean that there would be an all-round selling. In cricketing terms, the domestic institutions in the short-term may prefer not to go in for a blast-outbut opt for singles, change the ends and hold on to their wickets for another day.

Fiddler on the roof: The second fiddle, the day trader, is a worried player. The intra-day volatility appears to have evened out to an extent. As the trader thrives on volatility, their operational field may be restricted. But, the sudden jerks and hiccups, caused by political factors, are not the trader's cup of tea. In an election time, thus, the traders are forced to limit their activity and are prone to avoid sharp swings.

Another factor that is also bothering traders for sometime is the increasing flight of their favoured stocks to the trade-to-trade zone. Both the NSE and BSE have of late been transferring stocks to this segment, which demands delivery.

The prime mover of the market, the overseas funds and institutions, however, by and large, have proved that they are still open to revalue a stock, provided it has enough trading depth (liquid and the number of floating stock is substantial). One gets the feeling that the oil and energy sector counters continue to be their favourites; the rush for the ONGC primary issue notwithstanding.

Last week, FIIs were net investors on all the trading days, despite their beeline for Indian primary issues. The investment figures suggest that in spite of churning of portfolios and certain exits, their net investment was higher than the previous week.

Incidentally, in the last nine weeks of this calendar year, as many as 21 new foreign funds have flocked to India — from different directions including the US, Europe and Japan. The frequent presentations by the Indian companies, organised by abroad, have been indicating greater and broader interest in the domestic stock market. (This week one such conference is taking place in Singapore, courtesy ICICI Bank.) However, among the emerging markets, India is still not among the hottest.

The Buffet effect: The rumour and denial by Mr Warren Buffet last week over his reported bid for the ONGC is an interesting commentary on the local market in a couple of ways.

First, the rumours were scotched by the spokesperson of Mr Buffet and not by the authorities here, even as it may have influenced the stock's price in the secondary market. Second, the market is seriously looking for a friendly buffet from Nebraska to gain recognition as an investment destination.

This week, after the denial, there may be an initial blow to the stock price in the secondary market. The denial also brings to the fore, that the local stocks (and the market) have not matured enough to attract Mr Buffet. Of course, the overseas fund officials admit that Mr Buffet have not so far taken interest in the emerging market except a few stocks here and there; Petro China being one of them.

Neither he is known to prefer participatory notes for investments in uncharted waters.

More Stories on : Stock Markets | A Ringside View

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
How corporate governance rating would help

Mutual funds not keen to disclose average AUMs

Pressure on debt funds may continue

With election round the corner — Players may be on the defensive

`Underlying potential favours equity'

VSNL, MTNL in fine tune

DCA chalks out programmes to protect investors