Some Surprises In Msci Recast
Mumbai
The Morgan Stanley Capital International's (MSCI) index recast did throw up a few surprises at individual scrip levels. The same got reflected in prices towards the close. Though India's weightage has been partially reduced, at a macro level it does not signify any dramatic shift in thinking towards the basket of Indian equities.
However, what surprised a few analysts was the exclusion of Reliance Petroleum. The explanation for this was that since the holding of Reliance Industries in Reliance Petroleum is very high, it has a ripple effect if both stocks are included. This seems like a late realisation even if the same is true.
Volumes continue to be lacklustre indicating the absence of conviction among the majority of participants. Contrary to popular perception, many local speculators have burnt their fingers badly during the recent phase of volatility. Any recovery before these scars have healed is unlikely, therefore.
ICE story continues: In spite of the dramatic erosion in several ICE majors, the MSCI recast has given some solace to diehard believers in the ICE (information technology, communications and entertainment) story. In fact, just as the debate on whether it was time to shift to the Old Economy stocks was gathering momentum, this recast in favour of ICE stocks has provided some cheer.
However, analysts are of the view that an investor needs to be stock-specific and restrict oneself to a small basket of quality stocks, rather than buy all and sundry in a state of euphoria.
Normal monsoons: Some good news at the macro level is the early indication of a normal monsoon. Though Gujarat was suffering from drought, several Mumbaikars had a taste of pre-monsoon deluge yesterday. Taking the arguments of the bulls a little further, it could be said that the normal monsoons should reflect itself in the crop harvest.
Pundits confused: The biggies in the US markets are confused by the movement in global markets. If the latest reports are to be believed then the mighty George Soros has decided to call a halt (temporary?) to wagering. If this is no solace to punters who have lost money in the recent meltdown, then even the wise old Warren Buffet seems to have decided to substantially reduce his exposure to equities.
Value-pick Satyam: Knowledgeable investors are of the view that Satyam Computer offers an excellent investment opportunity at these levels. While Satyam's valuation is in the Rs 16,000 crore range, Satyam Infoway, in today's market commands a valuation close to Rs 15,000 crore if the latest deal with Mr Exit is anything to go by. If that is the case then the fact that the Satyam scrip is going at a great bargain price is obvious to say the least. In fact, a section of the market is of the view that by using the proceeds from the latest divestment in Satyam Infoway, Satyam can save a substantial chunk on the interest front by retiring its debt.
Lack of momentum: An interesting phenomenon of this week was low institutional activity. One of the factors responsible for this trend was Numero Uno's three-day conference for fund managers in Hong Kong.
The deliberations of this conference, if reflected in some more orders for Numero Uno next week; should come as no surprise. The Picket Fund is reported to have executed some sell orders in the last two days. However, the exact quantities could not be confirmed.