Bourses witness modest rally

By Oommen A. Ninan

MUMBAI, APRIL 22. The sentiment on the bourses is turning bullish. Foreign institutional investors (FIIs) have remained buyers throughout the stock market crisis. There may be a correction after the sharp rise last week.

``The negative sentiment which pushed down the market continuously in the early part of the month seems to be over. The year-end results coming from various corporates and the earnings guidance hold the future for the market,'' said Mr. R. Sreesankar, Chief Investment Officer, DSP Merrill Lynch Investment Managers.

``The markets may give a correction as the rally has continued for the last five days and on the last day of the week the market was showing some consolidation and this may continue in the first half of this week and thereafter Sensex should move up in the region of 3700 to 3800 where it may find major resistance,'' said Mr. Jignesh Shah, Strategist, ASK-Raymond James Investment Management. New Economy stocks showed strong bounce back as most of the stocks had been hammered down aggressively in the last one month. The financial results announced last week by Wipro and HCL Technologies restored the investor confidence and most of the new economy stocks had ended in oversold zones. ``Also the apex of the triangle had indicated a turning point for the market. Accordingly ``bear-rally'' (rally in a falling market) has started. Now one should keep an eye on the Asian currencies as charts of these currencies show weakness. In the meantime oversold stocks - new economy stocks - may continue with the rally,'' Mr. Shah added.

The Bombay Stock Exchange (BSE) 30-Share Sensitive Index (Sensex) gained 399.27 points or 12.5 per cent at 3583.04 compared to 3183.77 in the previous week. On the National Stock Exchange (NSE) the S&P CNX Nifty index went up by 117.55 points at 1143.75 from previous Friday's close of 1026.20. All the five days the Sensex was up. Many beaten down Technology, Media and Telecom (TMT) stocks gained more than 50 per cent as Nasdaq gained by 10 per cent. FIIs have remained buyers throughout the entire crisis in the stock markets.

The results announced by the technology heavyweight Wipro has been better than market expectation and its stock price nearly doubled.

``The improvement in Sensex last week is backed by improvement in sentiment about technology stocks,'' said Mr. Ashwini Agarwal, Executive Director, Kotak Securities.

There have been a host of companies in the West including IBM, Nokia, Microsoft to name a few who have shown quarterly earnings better than estimates. At home HCL Technologies, Hughes Software and Wipro came out with encouraging results and reasonably positive outlook for the future. Said Mr. Agarwal, ``it looks that the bottom is behind us for some time to come. I would expect the market to retrace marginally from current levels and consolidate its move upwards.''

This is time for the Government to build up investor confidence in the market. Therefore severe punishment for the market manipulators is essential. The Securities and Exchange Board of India (SEBI) waited almost ten years to debar Mr. Harshad Mehta from participating in the capital market after his involvement in the securities scam of 1992. Although steps like mandatory corporatisation of the exchanges, having a professional and independent board of directors to manage these exchanges and introduction of rolling settlement among a wider number of stocks will improve investor confidence, still there are a number of issues in the capital market for which the Government alone can take measures and correct the system.

The SEBI debarred BPL, Videocon International and Sterlite from entering the capital market for periods ranging from 2 to 4 years for manipulation of share prices of these companies in 1998. In the same issue the SEBI debarred Mr. Harshad Mehta permanently from the capital market. Now the Government has to take a decision whether the companies tainted with manipulative practices should be allowed in its ambitious disinvestment process. Only recently, the Government sold a large stake in Balco to Sterlite. Videocon is one of the bidders in Indian Airlines. The other bidder are the Hindujas and they have been chargesheeted in the Bofors case.

Retail investors are keen to know the decision of the Government in these issues. The Government has a duty to safeguard the interests of crores of retail investors. Today, investors have lost trust in the market intermediaries.

Here the Government has to intervene and rebuild that trust in institutions which are participating in the capital market. So any decision on allowing these companies to take part in the disinvestment process is keenly watched.

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