'M' factor pulling it down

MARKET WATCH

The markets have started showing worries connected to the 'M' factor. First, Manish Marwah, an operator indicted in the Sebi's report in the Atlanta price rigging case, was found dumping shares that led to a steep fall in the Sensex.

The huge 1000-point descent over the past few days triggered another 'M' "� margin calls. This will put downward pressure on the market when it opens on Monday. Yet another 'M' is Manmohan Singh. His remarks on inflation-control measures have kept the Street guessing on whether the Budget will take some harsh measures on this front.

The list of 'M's doesn't end here. The recent Merrill Lynch survey's findings that frontier markets such as Pakistan and Vietnam are better valued for investments than India has proved a huge dampener.

However, amid the spectre of 'M's, there is some hope for bank stocks in the form of the Reserve Bank of India's announcement on offering interest on CRR balances. Brokerages such as Motilal Oswal, which were advising clients to 'sell', are now turning optimistic as the market has already corrected, albeit for a short term.

Manish Santhalia, vice-president (equity strategy), Motilal Oswal Securities, said, "As the market has corrected, it is time to relook at it again and I would say that the pain from the system is out."

While the future direction will be determined by the Budget, he said, "technically, the market is not all that good as the Nifty has broken the 4000 support level." Santhalia sees sectors such as construction, engineering and infrastructure as the best buys before the Budget.

The research head of another securities house advises for soem prudent profit-booking now. Chartists say if it remains consistently below 3850, the Nifty will see a big correction in the coming weeks.

An interesting development has been observed with regard to the scrips of newly listed IPOs. Shares of a number of companies listed during the past four months are trading at discounts to their issue prices though some of them were earlier selling at premiums to the offer prices.

The list includes House of Pearl, Cinemax, Technocraft, Akruti Nirman, Cairn India, Nissan Copper, Gulsan Sugar, Ruchira Papers, LT Overseas, Blue Bird, Parshvanath Developers and Lanco, among others.

There is some hope for the market if one looks back at the market trends just before and after the history of Budgets, including the ones presented by the UPA government.

According to Edelweiss Securities, two of the three Budgets under the UPA regime, in July 2004 and February 2006, saw strong pre- and post-Budget returns. In the past seven years, the market went up post-Budget only twice.

Internationally, after Bank of Japan raised interest rates by a quarter percentage point to 0.50 per cent, the Nikki saw a seven-year high after a rate hike.

This was because the Japanese market was expecting the increase to take longer than anticipated earlier. This gave a relief with no bad news yet for equities in the international markets.