Market Matrix: The Indian Stock Market game plan

By krsna Khandelwal - A veteran market analyst

Friends,

The leading indices have been going up at break neck speed and Nifty has crossed the 5500 mark. In the mean time, there is no news to justify the same except a game plan may be underway by some influential FIIs or the like. It was puzzling me a lot as to what may it be. Today, I have some idea as to what may be in store.

Mr. Ramesh Abraham reported in today in Business Standard that about 1100 FIIs (I would call them foreign interests, may be with or without local patronage) have so far invested $60 b in markets, which may now be valued at $220 to 250 b. Over an average period of investment of less than 4 to 5 years, the returns are fabulous. Only problem is that as there is some thing in air that says that the going for the industry in general may not be good in India. The local industry is suffering badly for the dollar has appreciated and there are other signs which may be called stressful i.e. the rising wages, costlier raw material, interest at high point than it was a few years back, nearly the best ever operating margins in some of the industries like steel and cement, fresh capacities about to be operational and host of other things like the political turbulence etc. The fresh supply of paper is round the corner. Clearly, those in profit would like to book it. But there is a catch. It has been tested by the bigger fishes that whenever any attempt is made to sell, the slide in market is steep. It is also the case that the supply from weaker hands is no more coming in the market and hence even a small dose of money injected is able to raise the total value of the front line stocks much more. The loss of time will see the cat out of the bag i.e. the strained profitability would be a well-known fact and harping on the long-term India story would not be attracting many listeners.

The attempt therefore is to take the indices to the possible high with whatever resource is available and then one way selling will be resorted to, even beyond the most comprehensible bottom point in a very short run with the strategic position building in the F&O section. Even if the sales are pressed up to 3400 level the average for the sales in Nifty point terms may be ensured around 4300 level. Not a bad bargain in the end if the execution of the plan goes unhindered. Since all the money can not be withdrawn from the market all at once, three good sectors have been left untouched or manipulated downwards, namely, FMCG, Pharma and IT. These sectors are not prone to recession and are in fact on sound footings. While the sales are pressed for the rest of the items, scrips in these three sectors will be picked up so that some money may be deployed back just to keep the public liquid to some extent. This exchange would also be beneficial. Now, let us wait for the unfoldment of the final act of the drama.

My advice to you all is that do not ever try to catch the falling knife and stick to your investments in IT, FMCG and the Pharma and get out of the rest. These are my own deep thoughts and are without prejudice towards any one. Even if the game is played out like this, I would not call it blatantly unfair. Everyone has right to defend his own interests but without breaking the law. I do not think any law is going to be broken here. Of course, it is the govt.'s duty to have seen all this now whether the money in the game is legitimate and public is not going to suffer at the hands of holders of tainted money. I am not attempting to spread any scare; it is only that I am trying to put things in logical perspective.

Hari Om

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