The Hindu Business Line : Southward journey likely to continue

The current strategy appears to be - sell small but sell now. Maybe buy later. The aim: make others sell. Advantage: stop immediate loss and create opportunity for future move. Timeframe: till the Budget announcement.

THE market juggernaut is being put on a reverse gear. The commitments are down and psychological supports are being removed.

The total outstanding, before entering the second week in the near month contracts at the derivative segment on the NSE, is at a 10-month low of Rs 6,375 crore. The stock specific exposures are negligible and people are punting on the index futures rather than on stocks.

In the cash segment, indices were placed on a range, lower than the previous week.

Plot thickens: Some call it a theatre of absurd. To an outsider it may seem somewhat Kafkaesque. The drama, which is unfolding in June on Dalal Street, can also turn out to be Shakespearean tragedy - trouble in the beginning and rows of dead in the end.

If the earlier part of the bull rally had been a Bollywood blockbuster at its entertaining best, its tail appears to be bloody. The losses suffered through May and June so far are substantial. The players, who were neck-deep in equities, are rewriting the script.

The local bull operators have changed the formula of selling in derivatives and buying in the cash (or vice versa).

Though the FIIs made a net investment of just around Rs 170 crore last week, their gross sales and purchase figures were lower than that in the first week of June in the cash segment. They have also reduced their positions in the derivatives.

The domestic mutual funds were insignificant players in terms of net investment with total of around Rs 25 crore last week. A majority of day trading tribe is licking their wounds outside the ring while the retail investors are largely calculating their notional losses.

This week indices are likely to drift downwards. But major panic is unlikely. It is in the interest of the operators that is likely to keep the key indices within a trading range. However, they will hardly allow others to think through their management strategy during the session.

The FIIs are apparently not in the mood to hunt with the hounds in the local market. The current developments in the developed financial market, particularly in the interest rate oil and inflation fronts, have made them ponder.

The Bank of England has upped the rate, the Federal Reserve may also be a willing traveller in the same direction soon enough. The Asian emerging giants - China and India - for different noises over reforms are not sending out clear signals right now.

Even upward mobility of rupee against dollar is being called into question. Some have begun arguing that it does not reflect the intrinsic strength of the local currency, but the relative weakness of the dollar.

Sub-plot: Will the bearish view dominate the market and snap the bull phase? Mr P. Chidambaram broadly has to address this question. But then a "dream Budget" may not prompt a bullish call from FIIs. The investing mind has turned negative, it needs stars and times to make a box office hit out of a Budget.

In the time of globalisation, future of a local Budget may depend on global feelings too.

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