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Market, particularly the Sensex, last week did not go into a downward drift as was expected in these columns. Instead it went up handsomely.

The bounce-back occurred after FIIs turned net buyers in cash, while hedging in the derivatives.

This week, Dalal Street may begin trading on a positive note, but may not quite be able to generate momentum.

According to market intelligence, “informed buying” of sorts ahead of quarterly results also aided market sentiment in some mid-cap stocks. But this may not help in sustaining a broader trend until stock-specific fundamentals actually signal an improvement.

Psychologically, market has sensed a point of inflexion in the immediate term, but still remains tentative. However, the noise about a more serious correction has been replaced by ruminations over the possible hurdles in the way up. This marks a qualitative difference in perception, which may not necessarily prompt liquidity inflow.

Market expects there could be a CRR hike this week.

It also apprehends that the Union Finance Ministry may opt for some form of capital control (tinkering further with the norms related to participatory notes?). The Special Court, which tried people involved in the 2001 market fraud, may pronounce its verdict this week.

Market response to all these events could influence short-term movement. However, there is hardly any consensus which way market may swing in the immediate term.

In the backdrop of widespread losses recorded by a large number of domestic players since the second week of January this year, the driver’s seat is yet to be occupied.

A section of players tends to insist that the valuations have turned in favour of buying, at least in a one-year perspective, but seem to lack the courage of conviction to go in for aggressive purchases.

The securities transaction tax related issues may also prove to be a dampener to trading volumes.

In view of movements based on thin volumes, it appears that the market is still groping for a short-term outlook. The global and local cues and the signals from the technical charts have not been sufficient enough to draw liquidity out of the shell.

The earnings of the corporations have substantially discounted based on the global economic and financial market hiccups.

The possible scale-down in domestic growth has also been factored in. However, aware of the fact that an unfolding scenario may spring surprises either way, the market awaits more clarity at the policy and events levels and seems prepared for quick readjustments in investment strategies.

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

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