The subsequent effect of stopping one section of market participants from trading or taking positionscreates further volatility and unrestricted one way movement in the indices. In addition the outstanding long positions need to be financed which is fuelling speculation of a payment crisis. The outstanding amount could be as much as Rs 180 crore. The market has escaped one round of crises in the last week, but the coming settlement may not be easily bypassed. Rumours of certain brokers being in trouble is very widespread and can only be answered on pay-in day on Wednesday. The FIIs grim view on the rupee continues and the call for a substantial depreciation of the rupee is getting louder especially as the country could be forced to consider competitive devaluation eventually. This negative view on the currency has led to continuing selling from the FIIs, in a practically illiquid market which has created a perfect situation for a free fall. Opinions being expressed in official circles of holding the rupee at Rs 42 cannot help negative sentiments surrounding the currency.

The fire-fighting that the financeministry has carried out while re-aligning the budget proposals to meet the demands of its various constituents as well as that of the corporate sector has only fuelled speculation about the administrations longevity. The view that is likely to dominate in coming weeks is the ability of the administration to pilot its way through the present parliament session without losing more credibility. The market sentiment is such that it has gone beyond just counting revenue losses and questions the governments chances of survival; thus the market is more concerned with the long term impact of these moves rather than the shorter term effect. Even the fact that the finance minister reversed his earlier stand on buy back of shares had no impact on the market.

Gesco reflecting negative sentiment

Despite a better set of financial results for the year the Great Eastern Shipping stock seems to reflect the underlying negative sentiment for the shipping industry. With the Baltic Freight Index (BFI) the much trackedbenchmark for shipping freight rates settling at a seven-year low, the sentiment could not be worse.

But in Gesco's case there are certain advantages that are not properly reflected in the stock. First is the foreign currency that the company earns which more than adequately covers for any drop in freight earnings. Second, traditionally Gesco picks up vessels for its fleet, when the market is at its lowest. The company is cash rich and has adequate access to lines of credit for such a purpose. Besides the company had sold off a number of vessels in the last year and had just begun a fleet acquisition programme.

More significantly, in the last two years the company's revenues have been a lot less dependant on dry bulk freight business and has been more weighted in favour of the oil business. The oil sector now accounts for 65 per cent of revenues accruing to Gesco. Given the emphasis that the domestic oil industry has enjoyed in terms of investments the demand for Gesco's services should increase; both interms of demand for the offshore supply vessels (OSVs) that it owns, the rig leased out and lastly the product tankers that are used to transport foreign oil to domestic refineries.

The impact of such a strategy which was crafted last year reflected very clearly on the bottomline, which showed reasonable growth considering the doldrums the rest of the industry has been in. The stock has so far not reflected any of these positive developments.