Sentiment Likely To Remain Buoyant

The stock market is expected to remain buoyant in the coming weeks, with the Sensex likely to move in the 3300-3500 range, after having witnessed heavy selling pressure in the first 2 weeks of December.

The fresh buying spurt by foreign institutional investors (FIIs) in the index-based scrips has boosted the sentiment.

The 30-share BSE Sensex gained nearly 212 points from the final level on December 12 to close at 3540-levels on Friday last. GDR prices were ruling at a premium, which also indicated that there is still considerable amount of interest in the Indian papers. With foreign institutional investor investment in the first half of December remaining negative there is concern about the policy that the foreign investors will adopt in the coming days.

The selling by FIIs has stopped off late, as nobody would wait till the year-end to offload their holdings. Also, the prices of some of the scrips had hit rockbottom, which made investment attractive. Thus, some amount of buying has come in at these counters, said B G Daga, chief general manager, market operations,U TI.

He also points out that buying has not been limited to the pivotals, but also to some side counters and select scrips in the B-group. Foreign institutional investors will stop selling in the market which is expected to push the indices in the weeks to come. The GDR prices, too, have firmed up which indicates that the market will shore up in the coming weeks, said Nikesh Shah, head of research, N H Securities. Market players have interpreted the current spurt in stock prices as an effort made by foreign fund managers to prop up net asset value (NAV) of their schemes.

With the financial year ending for most of the US-based round the corner, the fund managers will try to prop up the net asset value by pushing up scrip prices in their kitty. This apart, the market looks attractive at these levels which has induced fresh buying, says another foreign fund manager.

On the other hand, the GDR prices, too, have been ruling at a premium which has given a fresh lease of life to the domestic markets. The global depository receipts prices have firmed up mainly on account of three factors -- the exchange rate has more or less stabilised, the prices of underlying assets have, too, firmed up and the demand of Indian paper has also gone up, Daga said.

However, the market players are of the view that firming up of GDR prices would not indicate an increased FII allocation in the coming year. These are two different ball games which cannot be linked. Interest in the Indian paper abroad is purely an demand and supply game, said a US-based fund manager.