The Telegraph
Since 1st March, 1999
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Drums silent in new march to the top
- Two-week-long choppy run in stock market puts retail investors on the retreat

Mumbai, Feb. 15: No one was popping the champagne corks when the BSE sensex topped 6000 points on Friday after gut-wrenching volatility that saw a hundred thousand crore of stock value melt away.

Now, as the January jeopardy turns into a February flourish, retail investors who saw their dreams of a quick fortune crashing with last month’s roller-coaster, are wondering where the market will take them. From the evidence on the table, it appears that they are playing it safe, choosing not to run the stock gauntlet.

“It’s jarring”, says a fund manager of a leading mutual fund of the way the index oscillated 150-200 points over the last fortnight. Indications of the small investors’ ennui lie in daily traded volumes, which plunged to an average of 135 million from 200 million in January. In the same period, traded turnover on Dalal Street is down to Rs 2300 crore from Rs 2800 crore.

The sensex swaggered its way to 6249 on January 9 but has been on a knife-edge ever since. The value of all shares listed on BSE (market cap) stood sliced by Rs 1,00,000 crore to Rs 12,48,437 crore on Friday. Markets recovered a little over Rs 50,000 crore since February 6, when the tally was pegged at Rs 11,93,755 crore.

These are numbers that are fodder for those who argue that bourses have been overrun by bears for the first time after May last year — the time when the rally started.

So, why are the markets shuddering' There are some who believe the spate of new issues, including Gail and ONGC’s flotations worth Rs 13,000 crore, lined up for launch in two weeks have made small investors and mutual funds sit on cash at this juncture.

Analysts say mid-caps (shares of middle-rung companies) that retail investors invested heavily in during the bull-run, have lost more value than heavyweights. They have now been left licking their wounds.

A section of the analysts believes a slide — a correction in market parlance — was long overdue because of the way the sensex ran up to 6000, without hiccups. “It is good. The weaker players are pushed out,” says Raamdeo Agarwal of Motilal Oswal Securities. He asserts he’s not pointing to retail investors.

So turbulent have been the past two weeks that Sebi is on its toes. But, there are still no answers on who’s selling. Fingers wagged at the FIIs, but the regulator’s figures on daily market deals kill the suspicion.

In fact, FIIs have recorded net purchases on most days, except a big negative on February 2, when net sales of Rs 436 crore arose mainly from the funds received from Compaq’s open offer for Digital GlobalSoft.

Market grapevine even suggests that some corporate houses, in cahoots with big brokers, caused the recent swings. The notion was that they were booking profits after having invested heavily. This cannot be verified though, as their transactions are not tracked like those of mutual funds and foreign investors.

Even mutual funds have been on the sidelines, barely making an impact on the stock markets. Ashok Kumar of Lotus Strategic Consultants says: “The bears have become so confident that they have initiated action this time.” The futures and options segment, which built up a huge outstanding on hopes further appreciation, has significantly pared down the exposures as operators book losses in a damage-control move.

The overweening view is that there will be no one-way march at a time when the nation heads for polls and deep-pocketed investors save for the March IPO flood.

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