The Hindu Business Line : Benchmarks may consolidate within a range

As predicted in these columns, the benchmark indices last week moved up to finish near their all time highs, the IT stocks shrugged off weakness and a large band of small- and medium-cap stocks rallied.

This, however, put many domestic as also overseas fund managers and equity strategists in a bit of dilemma ahead of December-January investment decision. A sudden appearance of non-institutional players last week in the driver’s seat forced the institutional investors to knee-jerk improvisations.

FIIs, after a substantial selling exercise in November, returned to buying mode. Activity of the mutual funds, however, suggested a tentative mindset.

But the broad-based northward push witnessed last week indicated a defiant and contrarian strategy by many, who pumped in enough liquidity to move valuations up. Sensing reluctance of the institutional investors to take a directional call, retail, corporate investors and operators took the initiative as if to pre-empt others who were awaiting earning growth cues.

This is significant for Dalal Street at a time when the experts from the institutional investment community have assumed the role of opinion makers as well as that of market movers.

Pre-emptive move?

Some of them have been recommending booking of profits on perceived overvaluation. A few HNI investors have also been chanting the same mantra for some weeks now.

This week, the benchmark indices may find resistance and may consolidate within a range as the institutional investors take out of their temporary bewilderment and pocket some gains. But the broader indices may continue to move ahead. Here the so-called smart investors are likely to be outnumbered, if not outwitted.

This could prove to be a seemingly unrecognised undercurrent. It is also a sign of belligerence by those who are lectured up on, day in and day out.

Fed meet

Equity market is not an easy place to straightjacket. If one attempts to understand the investor activism and individual research that now run parallel to the organised institutional market activity in the country, one may be surprised to see the extent.

The market intelligence suggest that if on December 11, the Federal Reserves cuts rate more than 25 basis points, which is already priced in, then it would be difficult for the institutional investors to hold their purse back.

The IT, cement, automobile and realty stocks may be the flavour of the week.

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

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