The Hindu Business Line : After upbeat weeks... <br> Market lacks direction; may witness correction

The utterances about an on-coming bull rally are slightly more strident this week, as money flow remains healthy. And so is the newfound love for equity and risk. The FIIs made net positive investment of Rs 423.20 crore.

IS the party over? Is it another bear rally — a trap for investors before an eventual slaughter? (It is not unusual for a bear market rally to last a year or 100 per cent, specialists remind). Or is the market cruising towards the runway before a takeoff? Dalal Street is more prone to flipping a coin instead of making a straight call when the decision is difficult.

Last week's guarded movements were symptomatic of a half-full-half-empty syndrome. The BSE Sensex posted moderate gains of 1.5 per cent. The other benchmark, S&P CNX Nifty, was a bit muted and recorded a gain of 0.90 per cent.

According to Mr V.K. Sharma, Chief Analyst of Anagram Stockbroking, Tuesday's slump brought about a much-needed correction. "But it wasn't a deep correction, as expected by some. No sooner than the marketmen were starting to get bearish, the upward move resumed," he observed.

The bullish view in the market is that after three years of being in the bear hug, investors were not at ease with a 22 per cent spike in the Sensex in just 7 weeks.

The elusive pullback has so far denied early entry for some. One is reminded of two axioms — markets are often irrational and hard to time. "The markets can be irrational longer than you can be solvent," John Maynard Keynes once observed. However, surveys have shown that the long-term investors always outperform market-timers.

Wall Street (or Dalal Street) has over the decades developed an art and science of explaining market moves with convenient reasons — fundamental or technical — on both sides of the fence.

The growing populace of traders, operators and fund managers on the street, is turning positive giving investors the confidence to buy more at this juncture. According to Mr Samir Arora, CIO of Alliance Capital and self-proclaimed long-term bull, many a sectors are still fundamentally undervalued.

The apparently safe strategy of buying on the declines are tested in times like this. One needs to discount the effect momentum has on a rising market.

While the current rally seems to be losing some of its early momentum, the Sensex is unlikely to make a strategic retreat. Closing above the resistance level of 3341, it is now headed for the 3416 mark, according to technical analysts.

The SBI is scheduled to declare its results on June 19. Its spot price declined by 5.19 per cent and the outstanding position rose by 5.94 per cent in derivatives over the last week. The HLL stock will quote ex-dividend on June 20. This is likely to depress its price on this weekend.

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