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Investors tuned to FM, markets to slide show

Mumbai, May 30: Bruised and battered, retail investors are waiting for clues from the government on how its charter of governance will calm a market spooked by bursts of anti-reform rhetoric.

And the man who will carry the essence of the charter to the bourses will be finance minister P. Chidambaram, who is slated to talk turkey with the top guns on the country’s financial frontline this week.

His trip follows the 223-point plunge in the BSE sensex on Friday and fears it will slide below 4500 in the next few days — another 300 points down from 4835.39, its last close. The bellwether barometer shed 126.18 points, or 2.54 per cent, in a wild week. NSE’s CNX nifty index lost 77.65 points, or 4.89 per cent, at 1,508.75. It slid 51.45 points in the week.

Sentiment has been negative since Friday. Will that change dramatically when the finance minister, a skilled debater and a leading corporate lawyer to boot, talks to big investors' Not many think so. “Every clarification adds to the confusion. Our level of tolerance has gone down,” says Arun Kejriwal of Kejriwal Research and Investment Services.

The nub of the problem, he believes, is that the markets were overbought. Investors upbeat about the return of the Vajpayee government amassed stocks but scampered out after the surprise poll outcome.

“Today, nobody wants to buy stocks,” said Kejriwal, adding cash is the preferred option in these turbulent times. He advises small investors to stay away from such a market, but says they should pick up shares when a big intra-day slump throws up good bargains — rare in the normal course.

Some brokers say any rally triggered by Chidambaram’s visit to Mumbai will be temporary. “Whatever he had to say, he has spelled out already. Everything now depends on the budget. That is where the fingerprints of the government’s economic policy will be seen,” a prominent BSE broker said.

That the markets are not ready to swallow the government’s assurance was evident in the way it recoiled on Friday after the common minimum programme (CMP). The Congress-led United Progressive Alliance (UPA) government’s Magna Carta disappointed investors with its silence on market sops.

The CMP reaffirmed there would be no divestment of profit-making public sector companies and banks. There are also concerns that populist measures adopted by the new government will send the fiscal deficit careening out of control. For years now, the deficit (states and Centre) is at 10 per cent of the GDP.

The finance minister has tried to soothe nerves in the market that reforms will continue, but it hardly helped.

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