The Professional Ticker Reader TM

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Sept 06, 2003

Markets hit 31 month high. Sensex gains 124 points.

Negative breadth signals caution as profit taking steps up.

Weekly statistics

The value of  shares advancing was Rs. 21100 crores and the value of shares declining was Rs. 13342 crores. This indicates a marginal profit taking bias. The total traded volume on the BSE was Rs. 10262 Crores. The total traded volume on the NSE was Rs. 24275 Crores.

The markets saw yet another bullish week as the indices surged to a new 31 month high. The much awaited correction came but fizzled out within a day as the undertone was too bullish to allow a deeper selloff. The global indices also saw a firm pattern as the Nasdaq and Nikkei hit new recent highs. That percolated down to the domestic software stocks as this sector had been languishing for a while. Our investors will recollect that we had put out a bullish outlook for the sector way ahead of the market expectations. The FII inflows continued unabated and the market breadth showed a tendency to book profits at higher levels. Traded volumes continued to be higher than the 10 day average and higher volumes were seen on down-tick days - a continued sign of concern with us. The Sensex  was boosted by ACC, BSES, HCL Tech, HDFC, Hind Lever, ICICI Bank, Infosys, ITC, MTNL, Ranbaxy, Reliance, Satyam Computers, Telco, Tisco and Zee Telefilms. The Sensex  was dragged down by BHEL, Castrol, Cipla, Colgate, Dr. Reddy, Glaxo, Grasim, Hero Honda, HPCL, HIndalco, Nestle and SBI. The rupee ended the week at 45.88 ( - 00.03 ) levels against  the US $.

Note - The put call ratio is at 0.26 : 1.

The markets are still firmly in bullish hands as the much awaited correction is still elusive. The markets have surpassed hurdles like the petro price hike, HPCL & BPCL disinvestment hiccups, profit taking and overbought indications. The positive triggers are new additions in the F&O list, reduction in the contract size in the immediate future, and the upcoming quarterly numbers. In a bullish market, the earnings season tends to cause a flurry of activity around favoured stocks and that is likely to be seen this time around too - especially in technology stocks. The free float system of benchmarking seems to have gone down well with the markets. FII investment figures continue to be positive and the overseas markets are witnessing a bullishness too. The Nasdaq has hit 17 month highs whereas the Nikkei is trading at 3 month highs. Forex reserves have hit US $ 86 Bn. The undertone appears to be bullish and barring routine profit taking, we do not foresee major problems for the market. Investors / traders should however brace themselves for higher volatility.

The daily bar chart of the Nifty shows a continuing rising tops and bottoms formation with the index making higher closes for the 7 th consecutive week. The previous high of 1399 has been surpassed on an intra-day basis and the next meaningful resistance is likely at the 1422 levels. We expect these levels to be a more significant resistance as it was the absolute top of the year 2001. Also, it may please be noted that the index has run up too much & too fast. A correction would be healthy for the market, though I suspect that good retail participation may witness a very short corrective fall. On the lower side, expect support at the 1340 - 1350 levels to be meaningful in the short term. Expect profit taking at higher levels to continue.

Our outlook on the Nifty is that of cautious optimism. We advocate holding on to existing long positions with a 2.5 % trailing stop loss from the 1400 levels and refrain from very aggressive fresh buying.

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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