The Professional Ticker Reader TM

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Jan 31, 2004

Markets flatter to deceive. Sensex sheds another 121 points.

Electoral process, bear hammering knocks sentiment down.

Statistics

The value of shares advancing was Rs. 19,117 crores and the value of shares declining was Rs. 18,588 crores. This indicates a broader selling bias. The total traded volume on the BSE was Rs. 12,274 Crores. The total traded volume on the NSE  was Rs. 25,503 Crores.

The week saw a continued bearishness as the news of the dissolution of the lok sabha hit the sentiments like a fresh blow after a brief period of recovery. The expiry of the January series also saw an unwinding as the bulls succumbed to nervousness. The traded volumes remained higher and the market breadth was negative for the third consecutive week. That signals weakness as the bulls are clearly on the back foot. The technology sector dragged the markets lower due to it's high weightage on the indices. The Sensex  was boosted by ACC, Bajaj Auto, Bharati Tele, BSES, Dr Reddy, HDFC, HPCL, ICICI Bank and Telco. The Sensex  was dragged down by BHEL, Cipla, Grasim, HDFC Bank, Hero Honda, Hind Lever, Hindalco, Infosys, ITC, L&T, MTNL, ONGC, Ranbaxy, Satyam Computers, SBI, Tata Power, Tisco, Wipro and Zee Telefilms. The rupee ended the day at 45.31 levels ( + 00.04 ) against  the US $. Overall, the weeks trading was exactly in line with our expectations. Click here to view the previous weeks edition.

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Changes in outstanding futures positions.

Stars of the week

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

Market internals

Description	Rupees crores	Call options	Put options	Net position
Index Futures	1401
Stock futures	5183
Index options		233	69	164
Stock options		651	128	523
Total Futures	6584	Total options - net
Gross longs (F + O)	7468	Net longs ( F+O )	7271

 

Put call ratios

 

PCR - Index	0.31 : 1	Previous week	n/a
PCR - Stocks	0.15 : 1	Previous week	n/a
PCR - Total	0.15 : 1	Previous week	0.19 : 1

 

Note - +++ signifies higher open interest in the February, March & April series simultaneously.

The value of outstanding long positions (gross) is Rs 7,271 crs. ( previous week Rs 8,639 crs )

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The markets are likely to remain nervous in the initial part of the week as the weakness of the previous week is likely to spillover to the current weeks sentiments. Of the entire weeks transacted volumes, only 23 % of the volumes were transacted on uptick day(s), that shows a relentless selling by the bulls out of nervousness. The FnO positions have come down substantially and it should be noted that only 3 scrips have reached over 50 % of permissible exposure levels. There has been an average of 20 % reduction in long positions on a week-on-week basis, which shows that margins are likely to come down in the futures segment. The beginning of February will see two important developments taking place - the onset of margin trading / stock lending and curtailing of un-registered FII's ( hedge funds ) buying with short term perspectives. That is likely to be a major positive factor in the medium / long term. Should the implementation of the reduction of contract size to a realistic value of Rs 2 lacs be enforced, we expect the markets to show explosive growth upwards, due to sheer mass participation alone. A ready reckoner approach to measuring the downsides on our in-house developed weightage calculator ( click here to download the Nifty levels calculator ) shows a limited downside of maybe 2-3 % in a sharp selloff manner and a recovery thereafter. Also notice that the put call ratio ( PCR ) is again tilting in favour of the bulls, which is a positive indicator. The attrition on the technology sector coming under control, the markets will find stability immediately. The FII's have remained buyers last week and that has been a confidence inspiring development. Last week, we had advocated that bulls would find it difficult to sustain their long positions and therefore the market sentiments would be weak. Click here to view the previous weeks edition.

The overseas markets are showing signs of fatigue at higher levels and that will effectively cap the upsides in the near term. Overall, we expect consolidation in the coming week.

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The weekly bar chart of the Nifty shows a continued falling pattern as the closing of the week remain below the opening prices of the week. That signals a weakness in the undertone. Last week, we had predicted that the new upmove would commence only above the 1982 levels, which did not materialise. Support was advocated at the 1750 which was said to be a strong base. Click here to view the previous weeks edition. We re-affirm that support level, give or take 15-20 points. On the upside, we expect the first resistance at the 1860, then the 1885 levels.

Our outlook on the Nifty is that of caution as the index is expected to consolidate after a minor fall, if any.

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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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