Benchmarks could see a boost in sentiment
Jayanta Mallick
But the key question is sustainability of rally.
Dalal Street key indices may go up on sentiment boosts and short coverings
early this week, reacting to reduction in retail petroleum products' prices and
monetary signals from the central bank.
If market is positively surprised by the election results in four States,
scheduled to be announced on Monday, then it may also help the indices against
going down.
But if the mood will remain positive for the whole of the week is a big
question. Lending rates are not going to come down in a hurry.
Prudent banks would only go selectively for "good risks", which are not
abundant in the current scenario.
Serious defaults are staring in the face of banks or financial services
companies. Last thing a banker would like to do is to increase NPA in bank's
book in the current situation.
Market intelligence suggests that the real issue is not the liquidity, but
willingness to increase risk and down pricing of the risk.
Weak number expected
October-December quarter may prove to be unexpectedly bad for listed entities.
Market has been trying to factor in the earnings de-growth. There have been
substantial downward revisions in earnings by brokerages. But the lurking fear
is that it may fall far short of what has been apprehended already.
Anecdotal evidence and unofficial uttering suggest that there has been a
drastic fall in demand for goods and services quarter-on-quarter both on
domestic and export fronts. The measures that have been taken so far have not
changed the situation on the ground much. The quarterly results are still few
weeks away.
The advance tax data, which would be available in the middle of this month,
would give an early indication of how losses have touched India Inc. Some
market observers feel many companies may fail to meet their guidance. Some,
which had been perceived to be managing to stay in the green with reduced
profits, may actually report losses.
Indices performance
In terms of key indices, weighted financial services, oil and gas, IT,
engineering and capital goods companies have been affected by overall sharp
slowdown. Lower WPI level inflation has not spurred consumption as yet. There
has also been a lag effect in realising the benefit of falling commodity
prices. Even certain sectors, which cater to agriculture such as fertiliser and
chemicals have input inventories valued at higher prices. Only FMCG and
pharmaceuticals companies seem to have fared relatively better in the current
quarter.
Market was expecting a decent relief rally in December. But it may be elude
Dalal Street in the short term. The deficit-ridden Government has serious
problem in taking up fiscal measures to boost consumption and employment in the
medium term. Global economic cues are likely to continue to be bad in the next
couple of quarters in the least.
The rupee's depreciation against dollar has not yet been arrested. Significant
return overseas flow to the Indian equities appears distant. All these may
postpone the end of the bear market.
(Responses may be sent to [EMAIL PROTECTED])
http://www.thehindubusinessline.com/2008/12/08/stories/2008120851060400.htm
Time will explain it all. He is a talker, and needs no questioning before he
speaks.
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