Market takes political shock in its stride

Wednesday, July 16 1997

Market takes political shock in its stride

K Seshadri

July 15: The market has absorbed the first bout of shock from the political front. The Sensex closed at more or less the same level as on Monday. The market opened with the Sensex at 4225, which is the same level as the closing of the previous day. It did move up, but the gain was understandably small. The high for the day was at 4261. It slipped to an intra-day low of 4204.72 and closed trading, reportedly at 4221, at the time of this writing.

In terms of the performance of individual scrips, the pattern is mixed. As can be seen from the trading at the NSE. Scrips like Bajaj Auto and Hindalco continued to go down. On the other hand scrips like BHEL have sustained the shock well and are even showing signs of recovering. BSES and ITC are showing signs of stability and are improving.

IPCL continues to be weak. On the other hand, State Bank of India and SAIL, the other heavy weights, are holding their own. Among the Tata group, Telco has grown weak, but not so Tisco. L & T, MTNL and GE Shipping have lent support to Sensex. IDBI is slipping.

What is happening right now is trimming of excess fat. Wherever scrips have gone up too high, in relation either to their fundamentals or to technicals, are reacting. But the reaction has not spread to fundamentally sound scrips. Among these you find SAIL and Tisco.

Weekend consideration at the NSE must have decided profit booking and covering up. Wednesday's market behaviour should give important clue as it is the beginning of the new NSE trading week. The market players have two options before them. First, in view of the political developments, it is possible to exploit the loss of sentiment and try to extract the potential available for driving down prices. The scope here is however limited.

This is because, over the last 4 days scrips like Colgate have already shed their fat and are in fact preparing to go up again.

Again the steel scrips showing firmness would give a level of confidence to the market players. In those circumstances, how far one can push the market down is questionable. Not withstanding that argument, market players may go for the other options. And that is driving prices down on the first day of NSE, and then let the trend reverse. If that happens I think the market will find support at 4147.