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Corporate results may trigger next rally

The market has been a mute witness to the erosion of well over a 1000 points, even as it slid to December 1999 levels of 5000 points. In the process, all the gains made in the months of January and February, 2000 were totally wiped out.

The free-fall that began soon after the Budget announcements worsened during the last two weeks, with the market-favourite ICE sector (infotech, communication and entertainment) scrips bearing the major brunt of selling pressure.

Even US President Bill Clinton's visit did little to stem the rot and the markets went into a tailspin.

So what exactly has led to this alarming descent during the past couple of months? Apparently, there's no reason, which would warrant such a plunge at the bourses.

Strong scrips like Satyam Computer, Infosys Technologies and Himachal Futuristic have dropped more than 30 per cent from their highs. "The reasons," according Brian Brown, managing director, W I Carr Securities, "are redemption pressure being faced by the domestic mutual funds, heavy selling in key stocks by foreign institutional investors, and the fall in NASDAQ."

However, many other professionals confess that they are confused. They had expected a recovery this week as it was the first settlement of the next financial year. But that didn't happen.

"One should not look at the current fall in isolation. These are the same stocks that witnessed a meteoric rise in the months of January and February. It is quite natural that they 'correct' themselves, before the next rise," says the chief investment officer of a leading domestic fund.

Is this a correction or is the fall going to continue further?

No one seems to be certain about this. Leading markets aren't bearish either. Nor are the speculators advising to go short. "The market is taking a breather after its non-stop run to 6,000 levels. It is now for some good news," adds Brown.

"The undercurrent, nevertheless, is still bullish and the software stocks have corrected by more than 30 per cent vis-à-vis their highs. Plus, the year-end result expectations will start doing the rounds at the bourses. For the next couple of weeks, one can safely assume this being factored into the prices," says the director of a foreign mutual fund.

The level of 5,000 seems to be a good support level for the market. Twice this week, it dropped below this level and bounced back to close above 5,000 levels.

It looks like the market is consolidating at the current levels and the corporate results could just be the trigger for the next bull run. However, till the trend is clear, professional investors advice small investors to stay away.

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