The Professional Ticker Reader TM

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Jan 24, 2004

Markets hit by margin blow. Sensex sheds 130 points.

Negative breadth for second week in a row.

Weekly statistics

The BSE & NSE combined weekly value of  shares advancing was Rs. 18422 crores and the value of shares declining was Rs. 28770 crores. This indicates a broader selling bias. The total traded volume on the BSE was Rs. 15289 Crores. The total traded volume on the NSE  was Rs. 31977 Crores.

The week saw a weak trading sentiment pervade the market players as margin calls forced the besieged bulls to offload positions due to the finance cruch. The distress selling caused a domino effect to rock the markets as the indices plunged 4 days out of the 5 trading sessions. The market breadth was negative and traded volumes were higher, which shows a tendency to offload at higher levels. The markets though showing signs of recovery on the penultimate day of the week, still ended with net losses. The Sensex was boosted by Bharati Tele, BHEL, Dr Reddy, ICICI Bank, L&T, Satyam Computers and Wipro. The Sensex  was dragged down by ACC, Bajaj Auto, BSES, Cipla, Grasim, Gujarat Ambuja Cements, HDFC Bank, HDFC, Hero Honda, Hind Lever, HPCL, Hindalco, Infosys, ITC, MTNL, ONGC, Ranbaxy, Reliance, SBI, Telco, Tata Power and Tisco. The rupee ended the week at 45.35 levels ( + 00.07 ) against  the US $. Overall, the weeks trading was exactly in line with our expectations. Click here to view the previous weeks edition.

Changes in outstanding futures positions.

Stars of the week

Stock	Open interest	Stock price	Outlook
GAIL	Down	Down	Profit taking
Reliance	Up	Down	Accumulation
Tata Motors	Up	Down	Accumulation

 

Note - +++ signifies higher open interest in the January & February simultaneously.

The put call ratio is at 0.19 : 1 ( previous week 0.22 : 1)

The value of outstanding long positions (gross) is Rs 8,639 crs. ( previous week Rs 12,836 crs )

The markets are likely to be influenced by three triggers - results, news and overseas markets. Being the earnings season, we expect a polarisation of trading activity around those counters where companies are due to announce numbers. The news will be market sensitive policy decisions in terms of margins on F&O contracts, P/N issues and RBI norms. Since the RBI has cut the bank lending limit against shares to 50 % ( from 75 % ) of the market value, operators are likely to find it difficult to arrange finance. The impeding IPO's of the PSU giants like ONGC & GAIL are also likely to see a resource crunch as these are mega issues in the true sense of the word. The FII inflows have been positive this week but the rate of investment has clearly slowed down. The F&O outstanding positions have come down significantly as can be seen from the table above and the rollover to the next months series has begun in earnest. Our investors will recollect that we had categorically stated that there would be high volatility in this week, in the previous weeks edition. Click here to view the previous weeks edition.

The overseas markets are showing signs of consolidation too and will need to break out to signal a fresh upmove. Overall, we expect the markets to consolidate before they can move up again. The quality of trade needs to improve substantially as only 19 % of the traded volumes were done on uptick days ( Friday ) and the remaining was on falling days - a clear sign of nervousness.

The weekly bar chart of the Nifty shows a falling pattern as the resistance levels advocated by us at the 1982 mark in the previous weeks edition  Click here to view the previous weeks edition. was not surpassed. The lower level which was specified last week was the 1820 and the index has closed above that level !! In the coming week, the index needs to cross the above mentioned resistance before the fresh upmove can commence again. In the coming week, expect the 1750 to be the base below which the index is unlikely to go. As we have been advocating earlier, this is the first real correction after November 2003 and therefore high volatility is likely. The oscillators are pointing towards a correction and we feel the retail investors will tend to sell on advances to exit at minor profits / breakeven points.

Our outlook on the Nifty is that of consolidation in the coming week, with the worst part of the correction being over.

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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