It has been a grand fall for the godzilla of market indices, the 30-scrip BSE sensitive index. The sensex touched the calendar year 1997 peak exactly a year ago on August 5, 1997, at 4,548.02 . A year _ and an East Asian crisis, an economic slowdown, nuclear blasts, the resultant US sanctions, a swadeshi budget and the Moody's downgrade later_ it has lost 1,428.48 points (or 31.41 per cent) to close at 3,119.54 yesterday.
In the same period, the market capitalisation at the Indian markets has been eroded by 30.5 per cent from Rs 6,12,891 crore on August 5, 1997 to Rs 4,26,113.92 crore yesterday.
And despite three months of foreign investor outflows earlier this year, market sources are of the view that from here on not everything spells bad news.
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For one, chartists tracking the sensex feel it will be range bound in the trading zone of 3000-3300 levels in coming months. The intra-day low of 2951 on June 23, 1998 is largely seen as the bottom for the markets by chartists though most analysts say the sensex is likely to touch this level once before rebounding back.
The signs of worry are that most of the large cap market stocks in India are commodity-based and hence the Asian crisis will continue to have an impact (and thus the yen rate will become significant).
The top losers amongst sensex stocks in this period were Arvind Mills closing at Rs 36.95 (-73.42 per cent); SAIL Rs 7.05 (-72.8 per cent), Telco Rs 128.3 (-67.6 per cent) and M & M at Rs 145 (-68.4 per cent). Only four stocks gained, the main stock being Nestle India up by 45.5 per cent to close at Rs 420.7 yesterday at the BSE. On the flip side, factors like a kickstart for the infrastructure sector, the much awaited buyback of shares, UTI's approach to the equities markets, the Resurgent India Bond's performance and the opening up of insurance and real estate sectors will aid in improving the market sentiment and pushing the sensex upwards.
``The sensex will be range bound in the trading zone of 3000-3300. The positive factors which could pull the sensex beyond this level would be possible recovery in auto and cement sectors, the performance of the resurgent India bonds performance and the approach of the UTI following recent US-64 collections,'' says Soumil Trivedi, a leading technical analyst from NSE brokerage Dil Vikas Finance.
"There is uncertainty on the political front in India. The slide of the Japanese yen has resulted in the Asian markets fall. The US market too is not doing well. There is a need to adopt a new strategy for getting business.," says Brian Brown, managing director, W I Carr Securities.
"The market will remain range bound for atleast a couple of months. The sentiment is not likely to improve," he added.
According to K R Bharat, managing director, Credit Suisse First Boston, the fall for the sensex had come on account of factors like India not being viewed as a safe heaven in the Asian crisis, the nuclear blasts and a budget which was pre-1991 liberalisation and swadeshi in form.
Since then the negative budget provisions have rolled back and the government seeks more FDI in the insurance and real estate sectors. The RIB is expected to do well and the government has figured out that a socialist policy does not work. ``We are now overweight on India in the emerging markets sector'' he said.
Says C Jayaram, managing director, Kotak Securities, "The Indian markets are trading markets and driven by liquidity. However, liquidity is a necessary but not a sufficient condition. The triggers which will prop the markets up are the stability of the BJP government, pick up in demand on the economic front and a genuine kick-start to the infrastructure sector." Jayaram believes that the sentiment will remain lacklustre in the next fortnight. "In the medium term, the sensex will come down further to 2800-levels," he said.
Trivedi adds that over the long term there should be scaled down buying (buying interest at every 100 points fall). And on the upside, at 4300 a scaled out exit. ``So one has 1000 points to play with,'' he said. According to him, the current favourites like Infotech, Pharma and FMCG sectors will continue to shine in coming months.