Both old & new economy stocks set to gain

By Oommen A. Ninan

MUMBAI, JUNE 18. Even though a bullish trend prevails in leading stock exchanges, market participants are cautious on this week's outlook. However, as the economy also looks robust a bull run is expected on bourses in the medium term. Unlike the last bull run, this time investors will focus only performing companies which will be a mix of old and new economy stocks.

``The market today has become a mind game, where the fittest and most agile will survive. All your mental faculties will be put to test in the next three to four weeks as we expect the market to go up to 5000-5100 and then correct 20 per cent or so downward in slow but inexorable fashion. Only then will stage be set for an assault on Mount 6100,'' said Mr. Shankar Sharma, director (sales & strategy), First Global, a leading brokerage house.

The Bombay Stock Exchange (BSE) 30-share Sensitive Index (Sensex) closed for the week at 4764.67, only a marginal gain of 35.04 points compared to the previous week's close of 4729.63. The interesting point is that the Sensex flared up on the last day of trading, that too in the last half an hour, by more than two per cent. A mix of old and new economy stocks recorded strong gains, especially on Friday when the market rallied by 111 points.

However, investors are cautious in taking positions in the market. Explaining this complexity, the analyst said that among the more interesting emotional issues to examine is that investors who get one leg of the transaction right rarely get the other leg right as well. Said Mr. Sharma ``We got any number of our institutional clients out of the information technology, communication and entertainment (ICE) stocks at reasonable prices. But when the time came to get back into them, not even a single one had the guts to take the dive. Most were too busy gloating over the fact that they had got the crash right to see the very clear signals in the market that a reasonable rally in the beaten down stocks such as Himachal Futuristic, Global Telesystems and even Infosys. Yes, there were ample signals that these and some others were set for a good run, and so was the market, but few had the flexibility to change their mindsets quickly enough to go from being a bear to becoming a bull all over again.''

It was wild passion that drove stocks in last February and March and it was also wild passion that drove them down. Analysing the behaviour of investing community Mr. Sharma asked, ``Why do investors reduce the business of investing, down from a very cerebral level to very emotional one?''

One of the likely answers is that investors, big or small, generally get an inflated opinion of their own selves in a bull market. Making money becomes the easiest game in town, when almost any stock that one buys transports one's net worth up 40 to 50 per cent in a matter of weeks.

The exact reverse of this happens on the way down, when the pain of seeing profits evaporate and metamorphose into huge losses becomes unbearable and people run out and dump stocks indiscriminately.

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