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Stockmarkets: After the bloodbath (II) - Views on News from Equitymaster
 
 
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  • Jul 26, 2000

    Stockmarkets: After the bloodbath (II)

    The bloodbath witnessed on Monday showed signs of persisting when early Tuesday the bears gripped the market. However, very strong buying interest from domestic institutions and mutual funds helped the market stage a dramatic recovery.

    The one key fact that must be mentioned at the start is that FIIs remained net sellers on Tuesday, thus proving wrong the theory that it was they who caused the change in sentiment. The buying activity, according to knowledgeable sources, was led by domestic institutions and public sector mutual funds. Private sector mutual funds were also buyers on Monday (the latest available date for which data is available).

    What led to this surge in buying interest? First probably the markets had got ahead of themselves by pounding stocks even after the BSE Sensex had recorded a decline of over 270 points (contributing to the short covering on Tuesday). Second, of course, value investors and bargain investors would have become active. As we have mentioned time and again in our pre market commentary, the Indian economy is increasingly becoming more buoyant (as the recovery takes route). This buoyancy is supported by a sharp rise in merchandise exports (up 30% in May 2000). With no clouds on the horizon (even the RBI's rate hike is anticipated to be rolled back in coming months), the dip provided a buying opportunity for many.

    Today is the start of a new settlement on the NSE. What happens today is of utmost significance, as it will help determine how much of the buying interest witnessed yesterday was due to short covering activity. Investors meanwhile should take note how the markets sometimes get ahead of themselves. This is the time when opportunities present themselves and it is for us, the investors, to capitalize on them.

     

     

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