FIIs dominate market movement

Sanjiv Shankaran

THE average badla rate was around 11.50 per cent, significantly lower than the previous session's average rate of 13.75 per cent.

The aggregate carry forward/badla volume was Rs 2,642 crore, marginally higher than the previous session's turnover of Rs 2,628 crore.

The preceding settlement saw a small rally, the BSE Sensex gained 212 points (5 per cent) during the course of the settlement to close at 4,184 points.

An interesting and significant development during the week was an increase in net inflow of foreign investment. It may be recalled that Foreign Institutional Investors (FIIs) turned net sellers in December 2000, a period when the market indices slid in the latter half. Following that, the preceding settlement's rally in the backdrop of investment from FIIs highlights the dominant influence FII investment has on market movement.

All indicators suggest that FIIs will continue to exert an almost overwhelming influence on the movement of market indices. More than ever before, investors have begun to track development in the US and other developed markets to second-guess FIIs flow. After the critical interest rate cuts by the US Federal Reserve last week, things appear momentarily better.

The coming week will see unveiling of key quarterly results. Satyam Computers and Infosys Technologies will announce their results next week. Their performance is likely to be the primary determinant of market movement in the coming week.

The medium-term outlook for software stocks seems bleak. Questions about the likelihood of Indian software companies being adversely impacted by a slowdown in the US have already begun to make rounds. In this backdrop, if the top-rung software companies unveil results that doesn't quite meet market expectations, a sharp sell-off may take place.

Traders don't seem comfortable with the situation; a significant scale-down in the carry forward turnover in Infosys and Satyam took place. Not very positive signs.

In the uncertain situation that exists investors may consider getting out of positions created for the short-term. It may be safer to wait and gauge the undertone after the results have been unveiled before making the next move.