The Hindu Business Line : It's now consolidation phase

Certain quarters also have begun to speculate about chances of reinforcement of political stability conducive to accelerated liberalisation process.

DALAL Street is showing signs of uneasiness regarding the benchmarks. Is the height a cause for the concern? The general sentiment seems to be for a pause and consolidation.

According to some market players, this common perception may create a situation favourable for contrary calls. But, it looks that in the short run this may only put a few spikes. The sustainability of strong up movement is in question at this point of time.

The big players, particularly foreign institutional investors, are trying to look for signals on the macro economic front, which would accelerate growth. The perceivable positives have more or less been factored in the current valuations of the frontline stocks.

The possibility hardening of interest rate in the US in the near future and the growing chances of interest rate scaling up further may change the dynamics for India, some tend to feel.

Some of the overseas investors are trying to refocus on the reforms pace. A view that the country should gear up for a double-digit growth is gaining ground.

Certain quarters also have begun to speculate about chances of reinforcement of political stability conducive to accelerated liberalisation process.

In terms of investing strategy, a new trend appears to emerge. While an overwhelming emphasis on top 50 to 100 stocks continues, many of the institutional brokerages seem to look around for expanding their horizon among the mid-cap stocks across the sectors. The manifestation of this new outlook may be seen in its full glory in the three to six months time.

The local investors, who have been largely providing the demand for the mid-cap stocks, appear to be waiting for the quarterly results. An appetite for equities seems to be growing, but discretion has not left the local players.

The market appetite for quality primary issues has also grown. A slew of IPOs and issues from the listed companies are hitting the market within next six moths.

But the investors, despite a strong desire for travelling the equity avenues, may not lap up all of them.

The local stock market has reached a stage where everybody seems to be looking for further assurances of growth from the policymakers and the corporates. In such a situation, the sentiment tends to be fickle and volatility is part of the system.

It is a difficult call if some of the long-term investors would like to take profits at this juncture.

There seems to be balancing factors also in place. For example, if hedge funds go for some profit booking, a set of new overseas investors appears to be ready for buying.

Thus, it is highly unlikely that a sudden spree of overall selling would emerge and send the benchmark indices crashing.

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