World markets save, world markets damn

The dependance of Indian market sentiment on the global investor mood was again proven with Friday's rally. As Japanese and other Asian markets bounced led the way with relief rallies in the morning, the Indian markets too followed- with the typical over-reaction.

The rise in most of the Indian indices on Friday were around 5% while the Japanese Nikkei rose by 0.81%, the Hang Seng 1.16% and the Taiwan Index rose 1.78%.

Monday's action at the east Asian markets are likely to again set the mood for the Indian trader next week.

On the institutional side today, a strong buy of Rs 381 crore by the foreign investors emphasised their reading that at least some of them have switched from the 'overpriced' view to an investible one on Indian equities.Most expect the dependance on world sentiments to continue for
the Indian markets and do not think that the bottom has been hit as of today.

"Until the froth on the US interest rate swing and commodity swings subside, the markets will have a downward bias," said Sandeep Shenoy, strategist with Pioneer Intermediaries.

For those waiting for the bottom to start deploying cash, Shenoy, like every other expert, has only a long-term view to offer. "The fair value of Indian markets is estimated by us to be around 9800-10,200. We had swung way above it and now we are going to be way below it. Hence a generic buying opportunity would present," he pointed out.

However, mutual fund redemptions, which set off a whopping Rs 1,100 crore sell-off by them till yesterday, is not likely to abate due to the inertial nature of investors, keeping the possibility of any further down-side being amplified by domestic fund selling next week.

"It will take more than a one day's rally to convince many of my customers," a fund-manager pointed out. However, big retail investors and traders, who were mainly responsible for taking the Sensex on a record rally today, are likely to continue to take their cues from the global markets, a dealer pointed out.