Bulls Caught On The Wrong Foot Again

It really needs a very stout heart to be a bull these days. They are faced with a double devaluation _ i.e devaluation of the existing portfolio and losses on the trading front. Valuations seem to be of very little consequence to foreign fund managers who are busy beating scrips out of shape through relentless sales.

Bulls, who entered early on in the day in the safe hope that the market has bottomed out, were in for a rude shock. A leading US-based fund upset the applecart of the bulls by pressing huge sales at the Reliance counter.

Informed sources said that the fund offloaded around 20-25 lakh shares of Reliance severely affecting trading sentiment at the bourses.

 

In the ensuing panic, operators liquidated their long positions, sending the Sensex into a tailspin.

The Sensex crashed by nearly 81 points from the intra day high of 2919 levels. However, as soon as UTI commenced purchases towards the fag end of the day, punters once again made a comeback with renewed confidence.

Yesterday clearly belonged to the Reliance scrip which was the talk of the town, thanks to the massive sell order at the counter.

Curiously, there seems to be a renewed "buying interest" in Reliance, judging by the way the stock staged a recovery after crashing to the lower end of the circuit filter. The sudden sell order at the counter took the entire market by storm.

Foreign funds have been regular sellers at the counter over the past few weeks, offloading around 4-6 lakh shares on an average every day. Players said that the huge sell order at the counter in a single trading session indicates a desperation on the part of the fund to get out of the stock.

As per the latest annual report of Reliance, the book value of the scrip is Rs 128. In the event of buy back being approved, the price at which buy back should take place is either the book value of the scrip or market price whichever is higher.

Many funds are viewing this as a tempting proposition.

On the flip side, foreign funds still continue to hold a sizeable chunk of the scrip.

The way FIIs have been dumping some of the stocks, there is no guarantee they might spare this scrip.

Also, with no clear cut signals from the government on the buy back issue, funds continue to watch from the sidelines as the scrip drifts southwards.

Coming back to the US fund on a Quit India movement, it is reported to have pressed huge sales on Tuesday mainly at the MTNL, BPCL, HPCL, and Bhel counters.

In addition, there is also another Singapore-based fund (not the one mentioned earlier in this column) which is in the process of lightening its portfolio at a lightening speed.

Maximum selling pressure was witnessed at the MTNL counter with around 5-6 lakh shares being sold by various funds.

Other casualties included HPCL (around 1.5 lakh shares ), Ranbaxy (one lakh shares between three funds) and Gujarat Ambuja Cements (two lakh shares).

Despite the sharp selling pressure at the Ranbaxy counter on Tuesday, the scrip staged a sharp recovery yesterday, moving up by nearly Rs 15 on the BSE and the NSE.

The Dabur scrip, too, figured on the sales list with around 60,000 shares being offloaded by a foreign fund.

A leading domestic fund is reported to be an aggressive buyer at the Telco, ITC and Satyam Computer counters.

Offbeat counters on the UTI's buy list on Tuesday included HDFC Bank (around two lakh shares), Cochin Refineries (one lakh shares) and Hoechst Marrion Roussell (35,000 shares).

It is also reported to have made purchases at the Asian Paints, Cadbury, Ranbaxy, Bhel, Coates Viyella and Indian Oil Corporation counters.