The Hindu Business Line : Confidence enough to hold market rally?

Divya (a journalist) is putting away her tax filings when her friends Bidyut (an economics professor), Jogin (a student) and Mack (an American expat working in India) barge in.

Jogin: I am hungry. Is there something to eat?

Divya: I should get a tax rebate for feeding you.

Look in the kitchen, you will find something.

Divya: Why didn't Bidyut and Mack feed Jogin?

Bidyut: We decided not to after he claimed confidence is everything in life.

Divya: How did that come about?

Mack: Bidyut was commenting on how the market has been on a rally last week. He said that the confidence boosting the Sensex might be short-lived. Jogin argued, `Confidence is everything.' So we want to see how long he can sustain on confidence.

Divya: You guys are hopeless. As far as the coming week is concerned, there sure is an aura of confidence. It is going to be a big week, especially for IT. Satyam bidding, Infosys results.

Bidyut: Infosys results are seen as a bellwether and closing Satyam sale might be a big boost for India Inc and the Government. But that does not mean all is well. Technically, at least, you cannot say when a bear bottom is unless it shows growth consistently. A rally is not necessarily a sign of growth.

Mack: Speaking of rally, did you notice how much some shares have gained this week?

Jogin: (Returning from the kitchen) I heard. Reliance Industrial Infrastructure and Essar Oil have gained tremendously.

Bidyut: Speculative buyers must be at play. They could have been attracted by the low prices and decided to make some money. This upsurge need not be an indication of anything else.

Mack: (Winking at Jogin) Which brings us to the point, confidence is not everything.

Jogin: So does the upswing indicate that FIIs are again buying shares?

Bidyut: I would think so. But I don't know if these are long-term purchases. There could be moves to buy cheap and sell in a bull rally to make good recent losses.

Jogin: I am getting a feel of a general improvement from across the world. The US has reported an increase in lending and decrease of mortgage rates. Some good news has come from other economies also.

Bidyut: To quote the OECD, there have been tentative signs of improvement in the rate of deterioration in the outlook in some countries. It reiterated the usage of tentative.

Mack: Some economic and corporate data are due out in the US this week. They could play a decisive role in deciding the equities' direction here.

Jogin: But not too much. Remember that domestic institutional investors have been propping up the indices when FIIs were pulling out.

Coming to think of it, these institutions must have terrific confidence in Indian equities.

Ram with inputs from Badri

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