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Bull operators were blessed last week in their endeavour to prop up the indices. They need continuation of positive signals from the rain god, the Government, Wall Street and corporate numbers at home to maintain the momentum.

According to market intelligence, operators’ current gambit will be successful if they can distribute quickly the stocks they have mopped up.

This week, two possibilities are there for the market. In one scenario, the key indices may be kept on the mark-up mode, while selective unloading takes place by rotation. The other scenario could be that despite volatility market would shift to a consolidating mode.

Bears think week after week luck will not shine for the bulls.

The good news for the bulls is that the bears and the cautious lot are not psychologically dominant now.

While some observers feel that an early tendency to create an equity bubble in the medium term was evident, market may take a roller coaster ride to move ahead during this time frame.

Intra-week and inter-week volatility is on the cards if Dalal Street wants to aggressively opt for growth discounting now.

Are there enough buyers at higher levels? The long-term investor community has not yet loosened their purse strings enough. But aggressive price actions do have a great sentimental value.

Operators will have to enlarge their risk profile to lure more players into the ring. The word doing the rounds now in the market circles is that the Government would soon come up with large-scale divestment plan and that would take the overall valuations a few notches up.

The invisible carrot dangles well.

A large section of investors, including overseas investors, are likely to be attracted to the equities if a major divestment plan unfolds.

Many commentators see it as a panacea for economic trouble now the country faces. These observers point out that the total amount collected through divestments public sector undertakings in the past 18 years is just $14.4 billion or $800 million per annum – and an annual average of just 0.17 per cent of the GDP.

There are various estimates of how much the Government can mop up from listed and unlisted State-owned companies.

A recent Morgan Stanley’s “very broad estimate” indicates that the total market value of Government companies (including unlisted companies) is $406 billion. The market value of 55 listed public sector companies is $281 billion.

“The average government stake in these listed companies is 80 per cent, and hence the government’s stake in these listed companies is worth $224 billion…. We believe that the government could realise a much higher amount if it were to make strategic stake sales with a transfer of management control to the private sector. The basket of unlisted companies is also large,” it noted.

Given the market’s sensitivity to the issue of divestment, operators would like to propose a market rally until the Government disposes it with a contrary signal.

Responses may be sent to jayanta_mallick@thehindu.co.in

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