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Rupee holds the key to the market

Rajesh Chandramouli

CHENNAI, May 28

THE markets are tipped to move sideways in the week ahead with selective buying in old economy stocks. Going by a week-on-week basis, the BSE Sensex could move in a band of 3,800 points to 4,200 points. The Sensex closed at 4,084.71 points last week.

According to marketmen, the rupee will hold the key. Last week saw the currency touch a historic low of Rs. 44.75 to a US dollar before the Reserve Bank of India (RBI) stepped in to control the damage.

Mr. Bharat Patel of JHP Securities said further depreciation of the rupee could see the foreign institutional investors (FIIs) pull out of the markets. He said that although rupee depreciation should be seen as good news for infotech companies, past expe rience has shown that whenever the value of currency slides, FIIs pull out and wait for clarity before they return.

The Satyam Computer episode, in which more than one lakh shares of the company were frozen on the downward circuit, seems to have sent a negative signal to the ICE counters.

Mr. Paresh Shah of Shah & Shah, said, ``We did not expect this from Satyam. Whatever has happened is not good for the company and on a wider perspective, it is certainly not good for the ICE counters. If this is any indication, then we should see a furth er fall.''

At the company's annual general meeting (AGM) on Friday, some shareholders questioned the management on allotting eight lakh shares to one of the promoters' family members with respect to the merger of Satyam Enterprise Solutions Ltd with Satyam Computer .

There could be a further fall in ICE counters, as Infosys and Satyam Infoway saw losses at the Nasdaq on Friday. Infosys lost more than $11 per ADR and closed at $138 from $149.50.

According to a fund manager at SBI Mutual Fund, ICE counters are looking attractive but with the prevailing poor sentiment, there is still time to start buying. The capitalised IT stocks should bounce back when sentiment turns positive, he added.

``With news of a normal monsoon ahead and poor sentiment in the ICE counters, we should see the focus shift to old economy stocks,'' Mr. Bharat Patel said.

Reliance Industries could see some buying interest in the early part of the week as the scrip ``surprisingly attracted'' a backwardation or ulta badla of around 35 paise per share. The market grapevine has it that there is a short position in excess of f ive lakh shares in Reliance.

On FII investments, the last two trading days of the week saw a net FII investment in Indian equities at Rs. 480.08 crores. However for May, the net investment in equities was at (-) Rs. 22.50 crores.

The badla session at the BSE on Saturday saw the average badla rates around 10 per cent, according to Mr. Shah. For the previous week, the average badla rates were around 6.5 per cent. With the markets moving up during the last two trading sessions, the sentiment seems to look better than the previous week, he added.

Mr. Ved Prakash Chaturvedi, Chief Executive Officer (CEO) of Cholamandalam Mutual Fund, said stock prices have more or less reached the bottom and this is a good time to accumulate. However, speculation in the bourses may continue for a while as the mark et was awaiting direction signals, he added.