Market discounts downgrade

MUMBAI, May 23: The downgrade in the country's rating outlook by Standard amp; Poor's Samp;P's has been viewed by a section of the marke...

MUMBAI, May 23: The downgrade in the country8217;s rating outlook by Standard amp; Poor8217;s Samp;P8217;s has been viewed by a section of the market as a pressure tactic to force India into accepting the terms laid out in the comprehensive test ban treaty CTBT.

quot;Is it a back-door pressure to get the Indian government to the negotiating table?quot; asked Wood Stock Securities chief Arun Kejriwal. quot;The move to downgrade the outlook from stable to negative is to put pressure on the government to sign the CTBT, as the sanctions are hurting the US financial institutions more than the Indian borrowers,quot; he explained in the light of the statement passed by the the US secretary of commerce, William Daley.

According to Daley, as reported by Reuters, quot;The major impact of the sanctions will be on the financial institutions which will be prohibited from lending to the India.quot;

The timing of the downgrade by Samp;P8217;s has left market experts a little confused as they feel that the rating agency should have waited till thepresentation of the budget to get a fair idea of the balance of payments position. BSE broker Maulik Sharedalal emphasised the importance of the forthcoming budget which could neutralise the negative impact caused by the Samp;P8217;s downgrade. quot;If we do get a fairly interesting budget, that might substantially offset the impact of the Samp;P8217;s outlook,quot; he said.

Essentially, the markets seem to be more concerned about portfolio investors and the direct impact of the Samp;P8217;s outlook downgrade in terms of the exposure the FIIs have to the equity and debt markets.

Sources also highlight attempts made by foreign fund managers to take fresh positions in those scrips which witnessed a mass exit. quot;First, it was the US sanctions and, now, Samp;P8217;s. Once we have committed a grave mistake by exiting at the wrong time despite attractive valuations and fundamentals. However, the mistake will not be repeated,quot; said a fund manager with a leading FII brokerage firm.

According to BSE president J C Parekh, the Samp;P8217;s outlook downgrademeans very little to the market. quot;The market will not react much to the Samp;P8217;s downgrade. Sanctions have induced particular steps by Samp;P8217;s, which has been discounted by the market,quot; Parekh explained. However, Ajit Sanghvi, director of Malini Securities, said the Samp;P8217;s downgrade will leave a negative impact in the short term.

Badla picks up on BSE

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MUMBAI: The carry-forward positions on the Bombay Stock Exchange BSE recovered from its previous week8217;s low of Rs 800 crore to Rs 1,048 crore. This helped badla rates move upwards to hover in the band of 18.5 per cent and 20 per cent annualised.

While marketmen kept guessing about the reason for indices moving in a range-bound manner despite heavy selling by foreign-institutional investors FIIs, the carry-forward rates have solved a fraction of this puzzle, said badla experts.

quot;Local operators absorbing the constant supplies pumped into the market by the FIIs saw the badla rates moved northward, coupled with the fact that large-ticket stockswill be out of the no-delivery category, hence they require huge funds,quot; said a BSE broker.