The Hindu Business Line : Advisories, more than war fears, to hit mood

THOUGH the market has not yet fully discounted war fears evident from last week's nervous sentiment, there has certainly been some dilution of the fears.

But what have affected the general sentiment badly are reports of some countries asking their citizens to leave India. If this trend continues, according to marketmen, it will seriously affect FII investment decisions. The outcome of the Finance Ministry's decision to appeal against a Delhi High Court order disallowing the tax-free status of Mauritius-based FIIs is keenly awaited.

With reducing tensions, the first two days of the coming week are expected to witness some improvements in prices, but any long- or even a medium-term rally is quite unlikely, according to a NSE broker based in Delhi.

Some brokers feel that a number of IT companies will fare quite badly in the coming days. "There's a good number of IT companies who are currently surviving on single contracts which will end in a few months and they have not yet reported any other big contracts. One has to be extra careful these days before buying into IT. In general, one may expect IT stocks to remain sluggish," another broker who simultaneously operates on BSE, NSE and DSE said.

He also pointed out that off late price movements in foreign markets were not affecting sentiment on the Indian bourses the way it did earlier. "Local factors such as border tensions and domestic financial institutions' perception seem to be the main determinants," he said.

According to an analyst with Value Research, the firm which tracks mutual funds and their investments, "the markets are expected to remain range-bound with chances of downslide in the event of a war."

On the bond section, with no more auctions due for this month, there may be a brief rally. However, owing to comfortable liquidity position, the possibility of a sudden open market operation (OMO) by the Reserve Bank of India (RBI) remains. Further, an escalation of border tensions could change things completely, the analyst said.

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