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Jayanta Mallick

THE stock market is still `waiting for the Godot'. "The initiation of a bull phase is proving elusive. The Q1 results of the old economy stocks may do the trick. The foreign financial institutions too seem to be waiting in the wings to resume purchases," said an institutional broker.

"In a nutshell, market is in an expectant mood. It needs confirmation of a recovery. The market also needs indication from the Government that it means business and not politics on the issue of divestment," commented a NSE dealer. Will the Government and the corporates oblige the market?

According to Mr S.B. Ganguli, Chairman of Exide Industries, which has turned in a good financial performance for the first quarter, profit guidance for a manufacturing company or a company depending on commodities or cyclicals is difficult. For example, the current softening of lead prices globally, which has helped companies such as Exide in the first quarter, may not last till the end of second quarter.

However, some of the producers of primary commodities or intermediates or final products are expecting sales growth in Q2 to continue against de-growth or stagnancy in the corresponding quarters of 2001-02.

"Even though the emerging markets may witness a buoyancy in the old economy sector, there is still a question mark over its sustainability, as a large part of the present sales growth is not through demand pick-up but by production control," observed an economist with a foreign bank.

The institutional investments in the last few months were hindered because of the so-called negative perception emanating from the Indo-Pak standoff. However, according to knowledgeable quarters, the tardy progress in the divestment process has also considerably dampened the enthusiasm of the portfolio investors.

The market analysts also feel that the FIIs may resume investments in the emerging markets shortly, but that their Indian operations would need a re-orientation. "Many of them have burnt their fingers trying to follow local operators. Significantly, they missed the current mid-cap bus waiting on the sidelines for a couple of months," Mr Mathew Easow of Mathew Easow Research Securities pointed out.

A section of market players maintain that the mutual fund managers also missed the present rally in mid and small cap stocks. "Much of the sectoral growth stories are premature, if not altogether suspect. Many of the stocks are fetching 10 times or more of their earnings per share. Interestingly, the retail investors are cautious and relying more on their trading instinct than on investment plans," says Mr Vivek Mahajan, a broker-analyst.

Some brokers pointed out that the price discovery process of the stocks on leading bourses was faulty. "It is interesting to note that day in and day out some of the stocks in the early trading hours are invariably quoted around their circuit filter levels. The trades are very small, but they influence the valuation of the stock through the session and the day's high or low is decided by those early transactions," a NSE dealer observed.

Another worrying factor, according to some seasoned players, was the building up of positions or continuation of large positions in certain stocks such as Satyam Computer Services, Digital Global Soft, GTL, Aftek or HFCL.

Sectorally, the tech stocks valuations would depend on the profit guidance put out by the big guns. The first-rung pharma sector stocks were showing some signs of weakness at the top.

The technical analysts said the stocks of profit-making mid-cap companies are likely to see new highs this week.

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