Mar 9, 2002|
Waiting for the winds
Much of the excitement seen prior to budget day has given way to markets easing into a mundane state in less than a week from the year's big event. With many of the industry reform announcements flowing in prior to the budget, markets suddenly are lacking fresh drivers. That said, international markets have perked with signs of global economic winds picking up.
The Dow Jones, NASDAQ, Hang Seng and Nikkei have seen buoyancy in the current week. Improvement in global sentiment is largely led by the west. American manufacturing and services index reported a jump indicating increased economic activity, consumer spending continues to remain steady while fourth quarter GDP numbers came in above expectations, which has fueled the theory of the shortest & shallowest recession ever in the U.S. However, while the Fed chairman is hinting of increased confidence in the future, he speaks of the country hesitantly emerging out of the downturn. Therefore, it could still be early to move into cruise control.
A look at Personalfn's portfolio analyzer (features changes in portfolios of various mutual fund schemes) for few diversified growth schemes -- offers investment flexibility to fund manager -- to gauge sector/scrips that this class of investors fancy seems to indicate that PSUs -- especially oil -- auto and to some extent IT are capturing asset share. That said, oil & gas companies have risen considerably and discretion now would seem to be the better part of valour. Over the past year, mutual fund net investments have been negative while foreign institutional investor (FII) flows have been positive. This anomaly is due to redemption pressure on UTI. In January '02, UTI schemes registered net outflow of approximately Rs 13 bn while the industry witnessed outflow of approximately Rs 4.3 bn, indicating that private sector funds are generating net inflows. Taking it a step further, UTI selling could be resulting in an overhang preventing a sharper rise on the bourses.
The Sensex is experiencing resistance at 3,700 levels resulting in the sideways movement. This was the peak in May '01, before the markets went into a slump till September '01. Beyond these levels there is mild resistance a hundred points ahead. Real resistance comes in only at 4,250 levels taking us to 2001 pre-budget levels. On the other hand, the downside seems to be equally sharp with support only at 3,300 levels. One gets a feeling the market is sitting on an inflexion point and the broad direction could be guided by fresh fundamental data.
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