After having suffered a spate of systemic shocks the markets seems to have turned resilient. Even the larger than expected reduction in India's weightage in the MSCI, saw the BSE Sensex shed a mere 14 points. The recast, which was announced in the MSCI Index to adjust for the free float on May 19, India's weight fell by 3 per cent to 4.49 per cent.
As most India dedicated funds follow a bottom-up approach, the recast had little bearing on their portfolio. FII's invested Rs 193 crores in the week following the recast, taking the investments well past Rs 10,000 crore for the calendar. Even as they continue with their investments across sectors and B group stocks, suggesting that the MSCI Index has little impact on the portfolio outlay. Moreover, the fact that the series of negatives earlier on have already lowered outstanding positions, also seems to have helped minimise the impact. However, the BSE Sensex being largely range bound, stocks whose individual weightings have moved did react.
Even as the sudden pressure on the ruling coalition threatened to put pressure, a quick patch up served the markets well for the moment. The technology led rally mid week guided by the NASDAQ and increased sector weightage in MSCI petered away soon. Rain gods however, decided to advance their yearly bonanza, much to the relief of the battered farmers and market players. The MET department has predicted the 13th consecutive monsoon, and is likely to end the two year old drought in the Western and Central parts of the country. Even before the markets could cheer, profit booking by domestic institutions capped any possibility of an upside to end the week nearly unchanged at levels of 3659. Fund behemoth Unit Trust of India was seen booking profits ahead of the its annual dividend extravaganza in July.
If there is anything that seems to be holding the market interest, it is the spree of open offers by India Inc. The deteriorating fundamentals, of the Indian subsidiaries like Castrol, Bausch and Lomb, Philips and Carrier Aircon have been milked by the foreign parents, who see this as an opportunity to increase their stakes.
Even as the market remains rather indifferent to the spate of negatives that have come in the last two weeks, it is likely to remain range bound, with the deadline for the carry forward trading on July 2 nearing. The BSE is scheduled to launch its first index based option in the coming week. Along with the existing Index Futures, this would widen the range of hedging and speculative tools and is likely to gear markets players to the new order in the future.