Liquidity, poll concerns spawn flighty bourses

The close of India's largest public issue, the ONGC float, has spawned uncertainty in the stock markets. Liquidity and general elections seem to be the prime concerns of investors today.

Market sources said the movements seen in the last two days on bourses are the natural outcome of these two concerns.

Hanu Bhatia, vice president, Parag Parikh Securities explains: "Foreign institutional investors (FIIs) are rejigging their India exposure to account for ONGC allotments. They have been selling other index stocks to accommodate both the expected increase in the weightage of the ONGC scrip in the broader Morgan Stanley Capital International (MSCI) emerging markets index, as also for their increased holdings, post-allotment."

On the other hand, domestic institutions are said to be actively supporting the indices and injecting liquidity in a cash-strapped market.

Indeed, a large domestic fund is said to have put in massive orders for the ONGC scrip on the Bombay Stock Exchange (BSE) at the fag end of the trading session on Tuesday.

The scrip vaulted 5.84 per cent on the BSE to Rs 834.00, pulling up the Sensex with it. The barometer index closed 4.43 points higher at 5525.09.

But market sources said corrections are healthy for the markets, specially when "we have crossed the under-valuation zone."

Nandan Chakraborty, head of research at Enam Securities, says, " The near term is fogged by initial public offerings (IPOs), elections, potential currency disruptions and if all goes well, more IPOs. And valuations, while being reasonable with reference to immediate growth and historical price earning bands, are not tempting any longer."