This would be the right time to check out the activities of the dominant market players viz, FIIs and mutual funds (MF). To one's surprise, the investing activities of these players display divergent trends.

While the FIIs have been pumping big money into the market, the MFs have been pressing the sell button. Net investment made by the FIIs in equity from March 1 to March 21, 2001 stood at Rs 1,723 crores.

However, MFs were net sellers of Rs 177 crore for the same period. In fact, they have been net sellers in the past two months besides clocking sales of Rs 1,200 crore and Rs 903 crore in February and January respectively. On the other hand, the FIIs have made net purchases to the extent of Rs 1,663 crore and around Rs 4,400 crore in February and January respectively.

The reason for this divergent trend is the slow growth in unit sales as well as redemption pressure being faced by the MFs. In other words, the behaviour of the MFs is the reflection of the sentiments of the individual investor, who is the first one to panic in a crisis situation. But FIIs have been buyers and are sitting on a large kitty of funds with little redemption pressure.

This panic has resulted in a shift of funds from equity to debt for the MFs while the FIIs have been reducing their exposure to debt.

The support given by the FIIs has saved the market from crashing further, which was already in the doldrums due to a number of reasons. Prominent among them was the alleged bear cartel. Adding fuel to fire was the payment crisis in Calcutta Stock Exchange as well as default by some leading Mumbai-based stock brokers.

Although the FIIs have shown some interest in the markets, the small investors would do better to stay away for the time being and enter only when things become clear.

Infosys Technologies
Mastek was the first major tech company to give profit warning that was soon followed by VisualSoft Technologies. Ever since the trend of issuing profit warnings from software companies started, investors have turned sceptical about investing in new economy stocks. They have turned wary and are pussyfoot to touch even the redoubtable Infosys stock. However, it seems that the fears about the future growth rates have temporarily receded. This may be said because of the further recovery witnessed in the stock in Monday's trading.

The stock had created a furore on Friday, March 23, 2001 when the market was abuzz with rumours of an impending profit warning from the software major. As a result, the Infosys stock had slumped to Rs 4,000 during intra-day trade, down 7.5 per cent from its previous close of Rs 4,322, but recovered to close at Rs 4,220.

This was after the company said that there will be no announcement before the fourth quarter results, scheduled for 11 April 2001.

The stock market has reacted positively to the announcement, interpreting the same as denial of any slowdown in growth rate in the immediate future. It may be recalled that the company has been growing at three digit percentages in the last three quarters of the current fiscal. So the fourth quarter results may, most hopefully, not reverse the trend.

However, a word of caution. Even though the stock has recovered from the intra-day low, one must not forget that the recovery was aided by very thin volumes. Hence, this could also be a transitory phase of the wild fluctuations as was seen on March 13, 2001. The scrip had touched its 52-week low of Rs 3,741 and saw erratic fluctuations of around Rs 1,000 during the day. So it is better to wait for the current rally to gain strength before rushing any judgment.

Prashant Kothari & Manish Joshi