Business Daily from THE HINDU group of publications
Monday, Oct 22, 2007
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Business Daily from THE HINDU group of publications Monday, Oct 22, 2007 ePaper | Mobile/PDA Version |
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Stock Markets Markets - Outlook Columns - A Ringside View
Assuaging sentiment: The Finance Minister, P. Chidambaram, addressing the media, soon after the market crashed in New Delhi on October 17 – As anticipated in these columns last week, the equity market was given a lever to correct itself. But it ended the week in an unsettled state. The 859-point weekly loss on the benchmark index, however, hardly reflected accelerated volatility induced, perhaps unwittingly, by the regulator’s proposed action, which was fully backed by the North Block. Collateral damageThough the aim was supposedly to flush out money flowing through the questionable route of participatory notes, the broad market could not escape the fallout. The move, which could have been a precision bombing exercise, left a trail of casualties. In the immediate term, confusion and uncertainty largely dictated Dalal Street. As almost all indices moved downwards, domestic investors, including small ones, paid a price. Attempts at clearing confusion over the interpretation of the discussion paper’s suggested move on the PNs, primarily among FIIs, would continue this week too, at least till Monday evening, when the SEBI chairman, Mr M. Damodaran would hold a teleconference with the overseas investors. Mr Damodaran told this writer on Sunday: “Wait till Monday evening. Already a lot of confusion has been created”. He was hopeful that the telecon should resolve the issues. On the issue of FII registration process, which was indicated by some of the investors as cumbersome, the SEBI Chief avoided a direct comment. He only said there were vested interests. But he added that the relevant issues would be addressed. FII inflowsAccording to market intelligence, a handful of foreign brokerages such as UBS, Goldman Sachs, Citigroup and Merrill Lynch have contributed to nearly 75 per cent of the money flow in the recent weeks through participatory notes. Largely, these in the derivatives segment – meaning the investments were derivatives of derivatives. If the Government and the market regulator are able to clear up the confusion over the implementation of the proposed move, which is to take effect (as of now) from October 25, then the market may recover from the short-term unsettling phase. Otherwise, further volatility and a downward trend in prices equity may accelerate this week on strong liquidity outflow and dip in sentiment. Response may be sent to jayanta_mallick@thehindu.co.in
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