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July 19, 2003

Markets sober down. Sensex sheds 29 points.

Higher volumes, negative breadth as results belie expectations.

Weekly statistics

The BSE & NSE combined value of  shares advancing was Rs. 11922 crores and the value of shares declining was Rs. 11890 crores. This indicates a marginal selling bias. The total traded volume on the BSE was Rs. 6903 Crores. The total traded volume on the NSE  was Rs. 17006 Crores.

The week saw the much awaited correction finally setting in. As was advocated by us, the Q1 results of software companies were a let down for the markets. Profit taking was also seen at higher levels as the whole market was expecting corrections at those levels and all sections of market players refused to enlarge commitments till those levels were not cleared. The market breadth was clearly negative as the above figures show. Traded volumes hit landmark highs which shows a return of retail participation. The index heavyweights are showing a sign of fatigue which implies a continued corrective sentiment. The Sensex was boosted by ACC, Bajaj Auto, Castrol, Colgate, Dr Reddy, Glaxo, Grasim, Gujarat Ambuja Cements, Hindalco, ICICI Bank, L&T, Nestle, Reliance, SBI, Telco, Tisco and Zee telefilms. The Sensex was dragged down by BHEL, BSES, Cipla, HCL Tech, HDFC, Hero Honda, Hind Lever, HPCL, Infosys, ITC, MTNL and Satyam Computers. The rupee ended the week at 46.25 levels against the US $.

*** DIGITAL, HINDLEVER,  INFOSYS, M&M,  &  TELCO  Open Intrest  UP By  10%, 7%, 11%, 16%,  & 19%   respectively.

*** GACM,  HDFC, H.HONDA, NIIT,   & RELIANCE,  Open Intrest  Down By  10%,  19%,  21%,  7%,  10%,    respectively.

The markets are in a corrective mode as the entire cross section of players expected a correction at the 3750 & 1185 levels on the Sensex & Nifty respectively. Since all players waited for someone else to do the buying, the markets feel for the want of buying support. The overseas markets are also not breaking out decisively from their congestion points as mentioned in our global market report section. The put / call figures point out towards a sobering mood as the outstanding call contracts have shrunk 10 % and outstanding put contracts have risen 6 % from their peaks / lows. Of the entire traded volumes transacted during the week, 60 % were transacted on downtick days, which shows a selling bias at higher levels. The RBI's decision to cap the interest rates on NRE deposits is likely to see a slowdown in US $ inflows. If the Rupee depreciates rapidly against the US $, we expect a minor flight of forex deposits. The currency fluctuation will have a volatile effect on share prices of software companies. The further decisions to subsidise interest rates to farmers and hold Nalco's disinvestment will be further dampeners on short term sentiments. Overall, expect the markets to consolidate / correct, but the mood will remain largely bullish.

The weekly bar chart of the Nifty shows a correction on a week-on-week basis. The index after hitting a 26 month high has closed lower for the first time in 8 weeks. It maybe noted that the oscillators have retraced lower from near overbought levels and the fast momentum oscillator was in the overbought zone for over 3 weeks. Therefore a corrective fall was imminent. It maybe recollected that we had advocated last week that the weekly gains made on the indices were purely due to Infosys' results ( 56 points on July 10, 2003 ) excluding which, the markets were flat and due for a fall. The 1185 levels were also forecasted by us as strong resistance areas, which the index could not cross. The index is now dangerously poised at it's 13 day SMA and should not close below the 1115 levels, or the upmove will lose momentum severely. Therefore, the important ranges are 1185 - 1115 for the coming week.

Our outlook on the Nifty is that of profit taking at higher levels, which will consolidate the markets into stronger hands.

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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