A deceptive calm prevailed on the National Stock Exchange on Tuesday. Sellers had their way all of Monday and for much of the two previous trading days. No wonder there weren't too many of that breed active on the last day of the NSE settlement as their earlier sell positions had to be squared up, which is why most pivotals were seen to gain towards the end of trading. But what happens on Wednesday is entirely another matter.

For one, at the moment the FIIs and the local funds have suspended their purchases, therefore depriving the market of funds. In fact, when operators began to liquidate their short sales on Tuesday morning taking stock prices higher it attracted a lot of selling from various funds, thus indicating that these funds will take advantage of a given situation to exit the market. Second, punters have an entire week beginning Wednesday to hold any fresh sale positions. Thus, leading to a strong possibility that the market could easily dip further on the first day of the new settlement; the consensus being another 200 points or so. And lastly, the Rs 1,300 crore of funds that came into the Indian capital markets in June on top of Rs 1,200 crore in April and May will not see an encore in July, in fact the first 10 days of July have already seen a halving of inflows over the previous month.

BFL Software buyout - No decision yet

According to recent news reports, Alliance DLJ Private Equity Fund-a US based fund, will acquire 65 per cent stake in BFL Software, a Bangur group company. But, the officials of Alliance DLJ say that no decision has been taken yet on this matter. The market, however, is agog with rumours that the deal is unlikely to go through.

Earlier, news reports said that Alliance DLJ will be acquiring 65 per cent stake in BFL Software at a price of Rs 106. Alliance DLJ is a joint venture between Alliance Capital of USA, an asset management company and DLJ, a leading merchant banker in USA. Alliance DLJ manages a $3 billion fund worldwide, most of which is deployed in the USA and partly in Latin America and Hongkong. Following these reports, the stock price has gone up from Rs 60 in the first week of February, 1997, to a high of Rs 113. According to punters, changes amongst the management of the company may play a major role in influencing prospective buyers. The senior vice president, B.G.Balakrishan, one of the senior most persons at BFL, has put in his papers. Sources say that few others may also quit. Officials of BFL, however, were unavailable for a comment. The software industry is people driven and the quality of personel is very crucial for winning and executing big contracts. Consequently, the valuation of an information technology company is very closely linked with its people. Since one senior person has left the organisation and some more may also quit, Alliance DLJ may change its view and consequently its valuation of BFL, say industry observers. And this can play a major role in affecting the deal, as well as the share price. The stock has already begun to react to this possibility and the price was down Rs 12 on Monday to Rs 102 from Rs 114.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.