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March 26, 2005

Markets in negative spiral. Sensex plumbs 257 points

Poor volumes, negative breadth as bears maul the bulls

Weekly statistics

Indices	Open	High	Low	Close	Change
BSE - 30	6716	6734	6412	6442	257.47
BSE - 200	902	905	852	856	43.55
NSE - 50	2117	2124	2007	2015	93.75
Dow Jones	10443 187	Nasdaq	1991 17	FTSE	4922 1
Advances	3113	Declines	9693	Put / Call trades - 71963 : 102611
FII Investments	Rs  8071 Crs Mar 1 - 23		Domestic Funds	Rs  1100 Crs Mar 1 - 23

The BSE & NSE combined weekly value of shares advancing was Rs. 9,074 crores ( previous week Rs 15,904 crs ) and the commensurate value of shares declining was Rs. 17,844 crores ( previous week Rs 21,587 crs ). This indicates a selling bias. The total weekly traded volume on the BSE was Rs. 8,859 Crores ( previous week Rs 15,259 crs ). The total traded weekly volume on the NSE was Rs. 18,369 Crores ( previous week Rs 23,718 crs ).

The week saw blood letting on the street as the bulls suffered as severe mauling on account of margin calls and year end considerations. As the downward pressure built up, stop losses were triggered and the negative spiral gained momentum. The traded volumes were lower ( also due to a shorter week ). The market breadth was very weak as the above table indicates and the indices fell past crucial short term supports. Higher crude prices, US interest rates and secular pessimism took their toll on the sentiments. The Sensex was boosted by Bharti Tele, Dr Reddy, Hero Honda, Hind Lever and ITC. The Sensex was dragged down by Bajaj Auto, BHEL, Cipla, Grasim, Guj Amb Cements, HDFC Bank, Hindalco, HPCL, HDFC, ICICI Bank, Infosys, L&T, MTNL, Maruti, ONGC, Ranbaxy, Reliance Energy, Reliance Inds, Satyam Computers, SBI, Tisco, Telco, Tata Power, Wipro and Zee Telefilms. The Rupee ended the week at 43.75 levels ( 00.10 ) against the US $.  Overall, the week was slightly out of line with our expectations. Click here to view the previous weeks report.

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• The markets are likely to take note of crude prices which are lower at US $ 54.84 / barrel ( previous week US $ 56.72 / barrel ). That is likely to be a positive indicator, however slightly.

• The FII inflows are turning negative as the week saw Rs 6 Crs inflows during Mon - Thu. That is likely to be the major worry for now along with the rising US $.

• The inflation has eased around 5 basis points from the previous weekend figure of 5.30 %. That will be a consolation for the bulls.

• The reduction in contract size of the f&o lots is being initiated from April 01, which is a major positive for the markets.

• The F&O indicators point towards a offloading bias ahead of expiry which is a routine phenomena. The nifty PCR shows a short covering bias at lower levels, which indicates that the fall is due to bull unloading rather than bear sales.

• The market breadth points towards a weak undertone as the table above indicates. Of the entire transacted volume during the previous week, 100 % was initiated on negative market breadth days which shows a selling pressure.

• The overseas markets have been subdued on high oil prices and inflation worries. That is likely to have a trickle down effect on the domestic market sentiments also and limit the upsides in the near term.

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Technicals

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For stock specific recommendations please refer to our special edition " Flavours of the week". Click here to view the previous editions of the "Flavours of the week".

Have a profitable day.

 

Vijay L Bhambwani

Ceo :- Bsplindia.com

The author is a Mumbai  based investment consultant and invites feedback at Vijay@BSPLindia.com and  ( 022 ) 23438482 / 23400345.

SEBI disclosure -  The author has no positions in  the stocks mentioned above.

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