Indices may witness minor correction

Sanjiv Shankaran

THE average badla rate for the market was about 12.75 per cent, higher than the previous week's badla rate by about 0.25 percentage points.

The aggregate badla turnover was Rs 2,968 crore, a jump of about Rs 246 crore in relation to the previous week.

The current badla session witnessed a few changes in the trading structure. One of the reasons that prompted a change to current structure is that the preceding badla structure limited liquidity because of a higher provision towards margins. With the current system, the cost of carry forward is expected to decline and thereby boost turnover. In this backdrop, it may be difficult to attribute the rise in turnover merely to the uptrend seen over the last month.

What is certain is that the last month has seen a marked change in tempo. Over the last month, the BSE Sensex increased by around 13 per cent. The uptrend was not confined to merely index stocks; stocks across-the-board witnessed a rally.

A development that has almost certainly driven the uptrend is the significant net investment by Foreign Institutional Investors (FIIs). In January, FIIs pumped in huge funds into stocks, a factor that has had an impact in the foreign exchange market too. The pattern of FIIs flows in the days to come are likely to be critical in determining if the uptrend will turn into a full-blown bull run.

In the coming settlement, the indices may witness a correction. Most stocks may shed some of their recent gains as the bulls take a breather.

If the correction does commence next week, the extent of the same should be of significance in gauging if the recent uptrend is just the beginning of a longer-term rally. Therefore, the trading pattern over the next few days may be a precursor of a longer-term trend.

Technology stocks, primarily, continued to attract most of the interest. Himachal Futuristic, Global Tele-Systems, Zee Telefilms, Infosys Technologies and Satyam Computers were some of the companies that attracted significant interest among traders in today's badla session.