The Hindu Business Line : Firm Sensex may see sideways movement

If you recognise that the Indian economy is undergoing a structural change and, at the same time, responding to a transformational shift in the global financial markets, then you are likely to accept that the local equities may be in for dramatic twists and turns ahead.

Contradictory stances

It is obvious that the investment strategies would require less of straight jackets and more of low-down research in a situation like this. It is also clear that strategies would differ from one individual or group to another. Absolutely contradictory stances may not be surprising either.

In the last few weeks, we have been indicating that in the short-to- medium the Sensex may tend to slow down in terms of relative performance and the mid-cap space is likely to attract increasing attention. This is becoming evident.

The institutional and corporate investors as also the HNIs are extending their research and investment reach more and more towards a new horizon, which encompasses a sizeable number of small-cap stocks.

Market intelligence suggests that overseas fund managers too are turning lowbrow in seeking fresh value propositions and may, in the short to medium term timeframe, chase more relatively less liquid or untouched stocks.

The perceptible changes in the regulatory environment in the recent times on Dalal Street have also been influencing investment tactics.

Though in the long term perspective all the segments of market participants seem bullish, dynamic adjustments in the short and medium term outlook is the order of the day.

Key factors

The key factors that are likely to influence the investing mind in shaping up strategies in the next three to six months are possibility of a general election here, signals – negative or positive – from the US, movement of dollar (against rupee) and crude oil prices.

During this period, metamorphosis of a large number of foreign proxy investors into FIIs would change, at least to an extent, the quality of liquidity inflow.

This week, the Dalal Street indices may attempt to move up, particularly the mid and small cap indices are more likely to perform better. The benchmark Sensex is likely to open firm, but on weekly basis may move within a range.

(Reponses may be sent to jayanta_mallick@thehindu.co.in)