Leading brokers indicated that the possibility of a stable government coming to power in the Centre could push BSE sensitive index to the psychologically important 4000-mark. This, marketmen say, will be irrespective of which party forms the government.
As soon as any indication is available on the possibility of a stable government, the market will witness a rally that will peak at the 4000-mark. The rally on Monday was propelled by expectations. The fall yesterday was due to the fact that many key institutions, domestic and foreign, did not participate significantly in trading, said UTI Securities Exchange managing director M K Khanna. He feels that while most of the activity was speculative, domestic institutions also sold to book profits.
A senior UTI official agreed to the fact that the market will rally to 4000-levels in the short-term. However, he also clarified that while UTI sold on Monday in the market, it was buying as well as selling in the market yesterday.
Sanjay Agarwal, CEO, Lloyds Securities felt that the next few trading sessions will continue to be volatile. There was not much of a delivery based volume yesterday. Positions were being taken on the basis of trends in election results. Many key investors were taking views on the possibilities of the new government and preferred to wait and watch. However, the undertone is very bullish and the market would rally by 200-250 points in the next few trading sessions, he said.
Devesh Kumar, head of research at ABN AMRO Asia Equities feels that the rally up to 4000 will not be backed by fundamentals. There is an element of nervousness about the hung Parliament. However, people will come back to the market after the government is in place. The rally may not be so high to touch the 4000-mark, he said.
Kumar also indicated that FIIs have shown a keen interest in India and the onus is on the new government to convert this interest into inflows.
Sanjeev Mohta director and head of research HSBC B&K Securities said that the market should now move back to fundamentals. However, at the moment, they do not look sound, he said.
Brokers feel that considering the fundamentals of the economy, FII inflows are unlikely to be very strong. However, there will no negative reaction from them. The political factor was always there in the market, hence even in case of hung parliament, there would not be a negative reaction from the FIIs, said a highly placed source at a leading Hong Kong-based FII.
This is a short-term reaction by the operators who believed that the rally can be sustained if BJP comes to power. Since BJP this looks a remote possibility, the operators off loaded their position, said a broker. He further said that till such time the there is a clarity on the political front, the sensex would rally in 3300-3400 levels. The FIIs would buy selectively and they would refrain from heavy selling. But once a stable government comes is formed, the market will bounce back to 4000-levels, said the source.
