Secondary mart turnover on the slide

The secondary market has witnessed a sharp fall in daily turnover over the past two weeks. Most market participants have apparently cashed out to keep the money to subscribe to the mega public issues lined up in the next one month.

Market experts believe that, though the new issues will add to market depth in the long term, secondary market liquidity will be impacted in the immediate future.

Jaideep Goswani, head of research, HDFC Securities, said: "Investors, both retail and institutional, are keenly awaiting the opportunity to participate in these public issues. Hence the market volume is expected to drop prior to and during the issues, lasting till the end of March 2004."

This is evident from the trading pattern on the National Stock Exchange (NSE) in this month. According to data available, the average daily turnover in February (till February 20) has dropped to Rs 5798 crore as against the average daily turnover of Rs 6,392 crore in January 2004.

The average monthly turnover at the NSE since April 2003 "" when the boom started "" has however been on the upswing. From an average turnover of Rs 2448.48 crore in April 2003, the turnover touched a high of Rs 6392.44 crore in January 2004.

Amitabh Chakravorthy, head of research, IDBI Capital, said: "I expect the secondary markets to remain weak and volatile as most retail investors are sitting on cash. Even the mutual funds, which were reporting significant inflows into their various schemes, are waiting for the big ticket issues like ONGC and GAIL to hit the markets. Only after these issues sail through smoothly, I expect the markets to rally."

Most analysts, however, believe the fresh issue of quality paper is a distinct positive for the market from a mid- to long-term perspective.

Companies which are coming out with Government of India's offer for sale include GAIL, ONGC, IPCL, CMC, IBP and Dredging Corporation of India. The floor prices for IPCL, CMC, IBP and Dredging Corporation's issues have already been announced.

An equity dealer with a domestic brokerage firm said the markets have been lacklustre for the last two weeks, with the public issues getting all the limelight. But post issues, the markets could witness a rally with the IPO hangover out, he added.