Fm Provides Some Leg-Up

Gloom made way for optimism towards the last half of trading yesterday. Just when several stocks hit the lower end of the circuit filter, select institutional buying resurfaced. This has renewed the debate as to whether the broad market has bottomed out or whether there is some more blood letting to go.

Interestingly, while the overseas markets are agitating over the possibility of the US Federal Reserve Board increasing interest rates by 0.5% or 0.25%, it does not seem to be on the radars of domestic traders. They continue to be caught up in the gloom of the past one month, which has resulted in a massive erosion of both real and notional wealth.

 

Software sops

The finance minister Yashwant Sinha chose the moment of gloom as the opportunity to make some important policy announcements. His proposal to continue with tax holidays for software firms set up in software technology parks up to 2010 provided much-needed relief to several start ups in Hyderabad, Bangalore and other cities.

He also announced changes to make employee stock option taxable at the time of sale only. This could provide the motivation to young talents to give their best.

...pharma also

The finance minister also made some positive announcements on the pharmaceutical front. This included his initiative to set up a R&D (research & development) fund as also the decision to raise tax deduction available to pharmaceutical and bio technology companies against expenditure on R&D to 150 per cent from 125 at present.

Savvy reacts

After keeping a close watch on the goings on, Savvy reacted with alacrity to lap up 3,00,000 shares of Digital Equipment. This send the stock sky rocketing to the upper 12 per cent of the circuit. The stock wound up at Rs 594 on volumes of over 19 lakh shares yesterday. Though Savvy displayed his buying intentions in ample measure, the exact quantities in other counters could not be confirmed.

Big Daddy joins in

Big Daddy finds Sensex at 4,200 an excellent time to step in. With assets under its management well over Rs 65,000 crore, the impact that is created when Big Daddy puts into action its intentions was in full reflection yesterday. The player with the largest exposure to the Indian bourses is speculated to have picked up a few ICE (information technology, communications and entertainment) stocks including Satyam Computer though the exact quantities could not be confirmed.

More contrarians

With shares frozen for half-an-hour after hitting the lower circuit of 8 per cent, traders and fund managers had adequate opportunity to review their view, at least as far as the short-term movements are concerned. But many others waited for a further 4 per cent decline before putting into action their thoughts.

The momentum built up with brokerages picking up small lots. A reflection of this trend was Y Car and Jordan's decision to pick up 35,000 shares of SSI. Jordan's intentions were in evidence yesterday as it decided to lap up 35,000 shares of Satyam as also 25,000 shares of Infosys.

The debate continues...

The dramatic swings has created a scenario in which even diehard traders are shying away from making a call on the future movement. This has left a lot of small investors a perplexed lot. In spite of seeing their market values halved, the small investor still continues to be stuck with his old ways of playing the game. One sobering thought is that with the gradual institutionalisation of the markets, these gullible players will route their investments through reputable funds. However, they continue to be a victim of the age-old weakness of wanting to make a quick buck without giving adequate thought.