Post-Holi, a colourful rally?

<div class="section1"><div class="Normal" style="" text-align:="" justify="">The market collapsed last week, swaying to the tune of foreign investors, who exited on fears of oil prices (which have fallen since) and a hike in interest rates by the US Federal Reserve. The BSE Sensex fell 257 points, or 3.8 per cent, during the four days (Friday being a holiday) to end at 6,442.It now appears oversold and ripe for a sharp rally, post-Holi. The India story still looks good and there is plenty of global liquidity around.<br /><br />Witness, response to UTI Bank’s GDR issue, which got bids for a billion dollars, and response to a fund offered to Japanese investors by Fidelity, for investments in India, which got a similar amount. Investors could buy into any strong share that has lost, say, 15 per cent of its peak price.<br /><br />Not only foreign investors but domestic investors, too, are changing their investment pattern in a major shift away from fixed income investing. <br /><br />In this they are being aided by fiscal policy, since dividend income is tax exempt (but interest not) as are long-term capital gains (not possible in a bank deposit). Since only about 1 per cent of individual savings goes into equities, there is huge potential for inflow into stock markets.<br /><br />The government wishes to encourage this, so that they can divest their holding in government firms at a good price, proceeds of which will now go into a fund for socially desirable purposes.<br /><br />The IPO market is booming, and slated to grow even more. If the IPO market is attracting a lot of savings, is it structured well for individual investors or can improvements be made? At a recent IPO analyst meet, of the eight people on the dais, two were from the issuing company and six from investment bankers, who compete to get the mandate. The fees, however, are too low to justify the competition. <br /><br />What, then, attracts them to the field? Perhaps it could be the discretionary allotment they have the power to grant, to their favoured clients, in conjunction with the issuer. Sebi allowed issuers to declare price band a day prior to opening of issue, obviously with intention of fetching issuer with closest possible market price. That means issuers are not keen to leave much on the table for investors. There ought to be a good rally in the coming week.</div> </div>