Oommen A. Ninan
Retail investors wait for more firmer indications
MUMBAI: Scaling a new high on the Bombay Stock Exchange, the 30-share sensitive index (Sensex) closed above the 18650-mark as the capital goods, information technology and banking stocks surged ahead. The rally in the indices was also supported by the Asian indices, which moved up on hopes of another interest rate cut by the U.S. Federal Reserve to stimulate economic growth in the U.S.
The Sensex touched a new peak of 18703.67 in intra day. It recorded a gain of 378.01 points or 2.07 per cent to close at 18658.25, while the 50-share Nifty moved up by 114.20 points or 2.14 per cent to 5441.45.
The market seems to be on a never-ending march fuelled by the liquidity from foreign institutional investors (FIIs). In the absence of contrarions and unwillingness on the part of investors to book profits, every buying pushes up the price of available stock, said V. R. Srinivasan, CEO, Brics Securities. According to him, the stocks from Reliance group have been singularly responsible for the surge in the index.
Except for a sharp fall on Monday, on the back of the confused political scenario, the market has been on the upward move in the last few weeks.
“What can spoil this party? Infosys results are expected on Thursday. Despite the appreciating rupee, the market expects better numbers and guidance from Infosys. If the announcement beat the market consensus, it will set the base for further scaling of the index. Reliance results are expected on Friday and if the numbers out-guess the street estimates, we can expect a further rally. However, if there is disappointment from any of these companies, one can expect a sharp correction.”
Mr. Srinivsan also pointed out that some more factors which would have negative influence on the market: The unfavourable developments on the political front and or tightening of funds by the Reserve Bank of India.
Barring these, it was generally expected that the index would continue to surge in the days ahead.
“The domestic institutions too are pumping in funds into equities, given the money raised by the insurance companies, especially under ULIP. However, the retail participation is by and large sobre perhaps waiting for more firmer indications of a sustained bull run.,” Mr. Srinivasan added.
Another school of thought believes that considering the over-bought condition of the market, the Sensex looks very stretched based on averages and the momentum oscillation. Hence, it is vulnerable for a deep correction considering the over-bought condition of the market, said M. K. Srivatsan, Vice-President, Technical Research, Darashaw & Co.
According to him, fresh buying can be considered after the corrective process is completed and the risk-reward equation is not very favourable for a medium term investor at the current Sensex level.