Jobbers exit saps out liquidity
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July 22: The Sensex has been moving in a range for nearly ten months since September 2009, and analysts say they have never in 20 years seen a market range bound for so long.
Mr Aneesh Srivastava of IDBI Fortis Life Insurance in a report says “We would reiterate our thought that CY 2010 would see a volatile and range-bound stock markets. Unfortunately, our forecast has proved correct so far with the market moving in one of the narrowest ranges in the past 20 years.”
In October 2009 the Sensex saw a high of 17,493 and in November it saw a low of 15,330. The Nifty has not been able to cross 5400 till July 21and there has been no decisive move after September 2009. In the seven months of this year the Sensex saw 17,473 in January and a low of 15,651and a high of 18,167.
So broadly it has not gone anywhere until July 21. While the indices moved in this range they strangely did cross new highs like in December when the Nifty touched 5,221, in January 5,310 and April 5,400 and on July 14 it saw 5,453. Though the market is range bound it is “moving in a rising channel. But it is not decisive,” said Mr Pradip Hotchandani, of Anagram Financial Services Ltd.
Ms Deena Mehta of Asit C Mehta attributes the range bound markets to volumes having fallen, as traders are no longer in the market. They created the liquidity. She said today the markets open with a gap up or down and stay that way. About 25,000 jobbers have lost their jobs as the machine does their work much faster.
Analysts generally feel that the unprecedented fall of the market in 2008-09 had to be followed by a longish range bound market which is a euphemism. For consolidation. From the March 2009 lows to June/July 2010 there was a rise of 80-90 per cent so there has to be a consolidation after such a huge crack. It is not uncalled for, they say.
Another reason for it being range bound is the shying away of the foreign institutional investors after the Lehman Brothers collapse. They investments have been erratic.
For instance FIIs turned to net buyers in June after selling heavily in May. FII’s bought stocks worth Rs 10,684.50 crores in June.
Domestic institutional investors (DIIs) continued to be the net sellers, shedding Rs 589 crores worth of shares in the month.
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