Hedge funds, which were major sellers in the last two trading days of last week, might continue their selling wave this week, as may others, and the market is likely to remain nervous, a dip-stick Business Standard survey of 25 domestic fund houses, brokers and foreign institutional investors revealed. 
 
All those polled said the continuation of the reforms process and a stable government -- in that order -- were the most important factors for market participants. 
 
Pradip Doshi of Pradip C Doshi Stock Brokers said: "The market could drift further downward if the 'stop losses' are triggered, as it happened on Friday. The investment community is now looking forward to the common programme next week, after which the market may stabilise." 
 
Asked whether they saw any changes in the reforms process, around 80 per cent of those polled said no but they said the method of implementation would differ. 
 
Shashi Krishnan, CEO of Cholamandalam Mutual Fund, said: "We expect reforms to continue but the method of implementation may differ. This may impact the market in the short term but the long-term view remains positive." 
 
He added that the markets were waiting for a clearer picture and the common minimum programme before taking a view in the near term. All the respondents said the market had already reacted to the comments on divestment and that these had been factored in. 
 
Interestingly, 65 per cent of the respondents said the downside to the market was seen as a level going down to 4,500, where the Sensex might find support, while the upside was seen as nearly the 6,000 levels if any positive news emerged. 
 
Brokers and fund managers said so far as investment strategies were concerned, a re-allocation of the sectors would be necessary. The divestment story has been virtually put paid to after the comments made by the Left parties, so the industries being looked at are software, automobile, engineering, cement and power. 
 
Foreign financial institutions -- consisting of those that have been investing in India for a long time -- said they were not yet decided on whether to raise or lower their level of investments in India, as compared with last year. 
 
Asked about allocations for investment in India if the government was found to be unstable but market returns were good, around 90 per cent of the foreign financial institutions said they would maintain their current allocations for the country. The remaining 10 per cent said they would reduce it over a period of time. 
 
A representative of a foreign financial institution who did not wish to be quoted said: "My reaction would be one of holding on to any investment I had already made in India but not making new investments for the time being. I would watch and wait. From a government perspective, I would be looking for no short-term changes of policy and a continuation of reforms and engagement with the private sector inside and outside India. Sharing the fruits of reform does not require abandoning it."

He pointed out that, taking a label-based view would not achieve much and it would be the policy reality that would count in the end.