The Hindu Business Line : Profit booking may check market momentum

Some observers expect hedge funds to offload before the Christmas holiday mood sets in next month. But there are those who believe that more money will flow into BRICs. –

It appears that Dalal Street has overcome a fear of a downward swing in the short term.

As more and more economies show signs of fading recession, confidence seems to be returning in the US. If Wall Street likes to believe that the worst is over, Dalal Street has its reasons to cheer.

In the immediate term, active traders and market players would like to maintain a positive momentum. However, it would not be surprising if this week an urge to take profit off the table is shown by a section of overseas investors.

Bonus bargain

According to market intelligence, hedge funds may be driven by the lure of a Christmas bonus. Some of them are likely to offload a portion of their portfolio before the holiday mood sets in next month. The selling targets could be mid- and small-cap stocks.

For the rest of the overseas players, this week may remain an opportunity for deployment of money that is likely to flow in.

Wall Street investment bankers and their advisors here have not signalled any exit strategy for Indian equities. On the contrary, some of them, including Goldman Sachs, have indicated flow to BRIC markets.

If overseas liquidity inflow increases in the short term, it will have a ripple effect on local investors’ sentiment. In the past couple of weeks the equity market here has stubbornly resisted a correction in the key indices on strong support from foreign investors.

There had been intense volatility. But at the end of the each day, market operators ensured redistribution.

A high-risk gambit has so far paid off. Some insists that it worked because demand from FIIs did not flag.

Market excitement over a slew of divestment proposals upstaged concern over probable withdrawal of expansionary measures. Majority of the market observers were expecting a short-term correction looking at medium-term fiscal and monetary outlook. Maybe it was one of those unscripted reverse psychology plays on the Street.

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

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