New Technology

The Sensex maintained its previous week's level and ended at 11,403 points on the last trading day of the week, Wednesday, rising by a marginal 0.65 per cent. Foreign institutional investors (FIIs) invested around Rs 2,491 crore in equities during the week. For the month of April, their total investment in equities stood at Rs 6,508 crore.

The sectoral indices presented a mixed bag of results last week. The major gainers were Information Technology (IT) and Banks, which gained 4.2 per cent and 1.7 per cent respectively during the week. The heavily battered sectors were Realty and Metals, which declined 5.6 per cent and 3.9 per cent respectively.

"The fact that the US economy is showing some signs of revival may have been reflected in the rise of the IT index last week. However, the realty index is still reeling under pressure due to anticipation of poor Q4 results," says V K Sharma of Anagram Stock Broking. India's largest real estate company, DLF, on Thursday posted a staggering 92.7 per cent year-on-year decline in net profit for the March quarter - a development that is likely to shake market participants' faith in the realty sector even further.

Inflation rose slightly to 0.57 per cent for the week ended April 18, 2009. It stood at 0.26 per cent the week before. Crude oil is currently trading at $49.9 per barrel, declining a marginal 0.7 per cent during the week. Gold declined by about 1 per cent. It is currently trading at Rs 14,520 per 10 gram. The rupee is currently trading at 49.8 vis-Ã -vis the dollar, appreciating 0.3 per cent during the week.

Unless and until markets in the US witness a sharp fall, the Indian stocks markets are expected to continue to rally. "Once the Q4 results have been announced, the markets are likely to move in tandem with the international environment. However, review your position in the market before the election results," suggests Sharma.

Share prices of Indian companies seem to get a boost from the amount of FII money being pumped in. An extensive research done recently by CNI Research Ltd, a BSE (^BSESN : 11403.25 0)-listed research organisation, on 394 companies which have seen increased FII holding has found that there is a strong co-relation between FIIs' stake and share price movement.

Scrips of 44% companies where FII raised stakes showed a significant rise, compared to 29% where their holding was below 5% and 23% where their holding was above 5% after selling.

The study was conducted when the stock markets were on a continuous downward spiral for the entire fourth quarter after the fantastic rally in December 2008. Of the 394 companies studied, FIIs' stake dropped below 5% in 121 while 164 companies saw FIIs selling but the holding was still above 5%, and in 109 companies FIIs increased their stake.

"This study should act as precursor for investors to decide on stocks they should be investing in. Share prices of companies in which FIIs were raising stakes have a greater probability of seeing a rise as against others. The drop in scrips of 56% of the companies where FII stake went up was purely on account of period discrimination. The market trend reversal started from March 17, and the effect of the buying in these companies was not reflected in the share prices due to lesser timespan," said CNI Research CMD Kishor P Ostwal.

The analysis also suggests that the prices have shown a downward trend in companies in which FII holdings have dropped. The drop is 71% in cases where the FII holding has come down below 5% and 77% in cases which saw selling but the holding was above 5%.

"The former represents a safe zone for investors as there is very little left with FIIs for selling and hence the price reversal will be sharp and very soon. This will help investors interested in bottom fishing", Ostwal added.

The only segment which poses a high risk is where FII holding is still above 5%. While this may not hold true if the market itself goes up substantially, but if for any reason there is a trend reversal and the markets start correcting, this segment faces the maximum risk as any negative outlook could mean fresh FII selling to generate cash, he said.

Thus, the study concludes that investors in companies which are in strong sectors and with visible growth, and those which have seen a steady rise in FIIs holding, should go all out. The bottom fishing should be done in the category where FIIs holding is below 5% or almost nil, eg. Century Textiles, Bombay Dyeing, CCL Products all these stocks have shown marked recovery from its low prices on FII selling.