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Where to from here… - Views on News from Equitymaster
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  • Nov 18, 2000

    Where to from here…

    The markets had an ominous opening to the week. The benchmark index, BSE, was down by more than 100 points on Monday last. However, it recovered most of the losses during the week to end with a marginal drop. The BSE was down 0.9% while the NSE fell 0.2%.

    The initial recovery seemed to be sharp as a leading analyst made a call on the S&P 500 stating that it was undervalued to the tune of 15%. This led to temporary spurt in global indices having a domino effect on our domestic bourses with TMT, obviously, the protagonist.

    However, the bulls could not sustain the run and the gains were wiped out that very day. With no immediate triggers, the rest of the week saw a range bound market. The NASDAQ did not help either with the US presidential elections still lying in limbo and frontline tech companies continuing to disappoint the street.

    Nevertheless, excitement on the bourses was created towards the end of the week with disinvestment news once again filtering into the market. This time it was the turn of the public sector unit (PSU) banking companies. Like always the positive news was ephemeral, as the Government clarified that it will continue to be the majority shareholder in these companies. Further, it was adopting a model of selective disinvestment. The rally in PSU banking stocks, which put the TMT counters to shame collapsed equally fast as the markets factored in the news.

    As mentioned earlier the hint of a slow down has frayed some nerves at the North Block. Consequently, there is an effort to expedite the disinvestment and second-generation reform process. The disinvestment minister, Mr. Arun Shourie, has gone on record stating that the incumbent Government will meet its disinvestment target of Rs 100 bn. Lets hope its not a case, once again, of empty vessels ….

    Such announcements though, will imply that the oncoming winter session of parliament will be critical and looked upon eagerly by the markets for that elusive kick-start. The incumbent coalition has a stiff agenda for the winter session. The current arithmetic in the coalition and the lack of majority in the upper house may result in a disappointment.

    Coming back to the markets the winter session will prove to be an important kicker. Further, December is the time when FIIs close books and this could see selling pressure entering the markets. The exodus might have already started as for the current week FIIs were net sellers to the tune of 1,115 m. Mutual funds were also net sellers to the tune of 2,044 m. If these players were sellers then who is buying, retail or momentum investors? Latest reports suggest that household saving is flowing more towards fixed deposits. Speculation maybe riding high on expectation from the winter session. Be wary and invest wisely.

    However, a lot will depend on the intelligentsia meeting over the next few weeks. Decisiveness will help clear the nebulous horizon over the longer term. NASDAQ will continue to be a short-term kicker. Presidential results may trigger a rally.



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