Downward momentum may continue (Source: HBL)

Downward momentum may continue Jayanta Mallick Institutional investors reducing portfolio.
The third quarter results have been testing convictions of the optimists. However, dampened sentiment has forced a large chunk of non-institutional investors to sell at a loss. Among the institutional investors, certain FIIs are also booking losses in their exercise to reduce portfolio. This week the Sensex is likely to test its bear market low. A moderate bounce back would largely depend on good news, whether domestic or foreign. If RBI takes a softer view on the interest rates, as expected by many in the market, the sentiment may temporarily change for the better.Bad news: Not yet over On the global front, bad news is not over. Things have turned trickier as the UK slid deep into recession after Germany, Europe’s biggest economy. The Obama euphoria may not drown out Wall Street concerns over the economy and sharp fall in profits. But one should not rule out the possibility of popping up of dramatically positive news when a new regime is taking over.While investment advisers remain bullish on the long-term prospects of Indian equities, their exercise in revising earning estimates is getting more conservative. Market strategists’ focus, on the other hand, currently seems to be on stocks and not the indices or sectors. There are indications that past practices are being reviewed and fresh approach towards stability in performance in troubled times is gaining prominence. The discounted market valuations are increasingly not being regarded as a trigger for buying.According to market intelligence, many prefer to keep cash and wait till the fourth quarter results and the elections.Some market players, who have large retail client base, suggest that small investors with resources not more than Rs 50,000 are steady and selective buyers in this difficult market. They appeared to be ready to wait for two to three years to earn a decent return. Fresh selling This is interesting in the backdrop of a fresh wave of selling by the FIIs and domestic institutions reducing their activity. Among the overseas investors, pension funds and high net worth individual or family investors were rather circumspect last week but mutual funds and hedge funds, particularly of European origin, have suddenly begun pulling out money. According to officials with overseas institutions, portfolio investments from abroad may turn negative or remain neutral in the first half of 2009 against estimates of a positive inflow.