The Professional Ticker Reader TM

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Aug 16, 2003

Markets hit 30 month highs. Sensex gains 37 points.

Technology underperforms even as old economy stocks rally.

Weekly statistics

The value of  shares advancing was Rs. 13381 crores and the value of shares declining was Rs. 8791  crores. This indicates a broader buying bias. The total traded volume on the BSE was Rs. 6541 Crores. The total traded volume on the NSE  was Rs. 15688 Crores.

The week saw a truncated traded pattern due to Friday being a holiday. Most of the parameters remained bullish and the market breadth in numerical and capitalisation terms was positive. Of the entire traded volumes on the BSE & NSE combined, only 25 % were transacted on falling days. That is a sign of optimism in the undertone. The technology sector continued to remain subdued. The markets have scaled new 30 month highs on the back of the old economy stocks. The Sensex  was boosted by ACC, Bajaj Auto, BHEL, BSES, Castrol, Dr Reddy, Glaxo, Grasim, Gujarat Ambuja Cements, HDFC, HPCL, Hind Lever, Hindalco, ICICI Bank, ITC Ltd, MTNL, Ranbaxy, SBI, Telco, Tisco and Zee Telefilms. The Sensex  was dragged down by Cipla, Colgate, HCL Tech, Hero Honda, Infosys, L&T, Nestle, Reliance Inds and Satyam Computers. The rupee ended the week at 45.89 (+ 00.10 ) levels against  the US $.

Note - 

*** ACC, HCL TECH, I-FLEX & M&M OPEN INTREST UP BY 12%, 7%, 9%, & 24% RESPECTIVELY.

*** BEL, HPCL, & MTNL OPEN INTREST DOWN BY 7%, 6%, & 9% RESPECTIVELY.

*** Put call ratio stands at 0.42 : 1

The markets are likely to remain firm as the undertone is optimistic. We foresee volatility in the near term due to the political development of the opposition moving a no confidence motion. However, the impact is likely to be limited as the general elections are just around the corner anyway. The drag on the markets is likely from the technology sector which has a heavy weightage on the indices. The main trigger for the technology sector's woes will be the strengthening Rupee which will keep the export earnings of the companies depressed. The overseas markets are firming up and that is likely to limit the downsides in the domestic markets also. The next big trigger for the markets will be the reduction in the derivatives contract size. That is likely to see a return of the retail investor in this segment. Overall, the chances of higher volatility in the coming week are significant as the indices are appearing over extended and overbought on short term charts. We therefore advocate abundant caution.

The weekly bar chart of the Nifty shows a rising bottoms and tops formation which is a sign of bullishness. The index is making higher closings on a week-on-week basis for the third week in a row and the oscillators are in the overbought zone for the last 2 weeks. That raises the probability of a downward correction. However, the overall sentiments will continue to be optimistic. In the short term, we expect the Nifty to encounter resistance at the 1253 levels, which needs to be surpassed on a continous closing basis with heavier volumes and a positive market breadth. The next major resistance will come at the 1280 - 1285 levels. On the lower side, we expect support at the 1200 levels in the immediate future. Start liquidating long positions if the Nifty stays below the 1200 mark.

Our outlook on the Nifty is that of cautious optimism. We advocate holding longs with a 2 - 3 % trailing stop-loss and advise refrain from buying afresh aggressively.

Have a profitable day.

 

Vijay 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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