Awaiting July 2

The market has begun to fall under its own weight, feel some keen observers.

With the realisation that, for all practical purposes, the 2nd of July is going to be the day for the end of carry-forward trading, brokers are cajoling clients into squaring up their outstanding positions.

Since the outstandings are more long than short, the inevitable demand-supply tilt towards the supply side is causing the market to crack.

Whether the slow erosion at the moment will result in a stampede will be a matter only of academic interest, as most players would like to wait and watch how the new system pans out before making any fresh commitments in the market.

Softening stance

The slow, but final buckling by players into unwinding positions is leading to a steady decline in values.

Since the bulk of the positions are concentrated in software stocks, the effect of the selling pressure is being felt most in these counters.

Added to this, is the regular supply by Big Daddy of whatever stock is salable. Sensing the weak sentiment, the Savvy fund manager sold around 3 lakh shares of SSI which sent the stock hurtling towards the 16 per cent lower limit.

Whether there was any other factor beyond this for the aggressive selling is not yet known. In all, 40,000 shares of Infosys were also sold today with the seller rumoured to be another prominent fund.

Big Daddy and the Small Daddy also sold around 75,000 shares of Wipro between them today.

Holy Cow effect

A high profile market operator, who has been extremely successful with his calls in the recent past, had an interesting empirical formula for narrowing down on stocks on the verge of a massive selloff.

Calling it the Holy Cow effect, according to him, every stock market the world over pushes a scrip to a new level of reverence, which at the outset may not be undue , but which gets overplayed after sometime.

Citing Infosys and Hindustan Lever in our local market as the prime examples of this theory, the man had predicted the downfalls of these scrips with great precision at a time when no one was willing to buy the theory that the stocks were overvalued.

He made it sound quite simple by saying that the very reverence in which the stocks are held causes them to get overowned, because of which, at one point in time, everyone is holding the stock, leaving no scope for latent demand to surface. The inevitable fallout - the stock crashes under its own weight.