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Nov 22, 2003

FII's spook the markets. Sensex sheds 73 points.

Nervousness on the upsides as FII's choke the investment taps.

Weekly statistics

The BSE & NSE combined value of  shares advancing was Rs. 15061 crores and the value of shares declining was Rs. 16735  crores. This indicates a broader selling bias. The total traded weekly volume on the BSE was Rs. 10127 Crores. The total traded volume on the NSE  was Rs. 21761 Crores.

The week saw a nervousness creep into the markets as the FII inflows slowed, than turned negative. The week was also eventful as the ruling govt came under fire for bribery and terror attacks rocked the global financial markets. The US markets continued to hog the limelight as the mutual fund scam saw the SEC pass strictures against the system. Being a nervous market, the bad news was factored faster than the positives and the undertone turned brittle. As we have been pointing out in the recent past, the volumes tended to be higher on falling days and rallies were accompanied by thin volumes. This shows a distribution taking place at higher levels. The global markets were weaker and the impeding expiry of the November series saw unloading of bull positions. The Sensex  was boosted by Gujarat Ambuja Cements, HCL Tech, HDFC Ltd, HDFC Bank, Infosys, ITC Ltd, Telco and Wipro . The Sensex  was dragged down by ACC, Bajaj Auto, BHEL, BSES, Cipla, Dr Reddy, Grasim, Hero Honda, Hind Lever, Hindalco, ICICI Bank, L&T, MTNL, ONGC, Ranbaxy, Reliance, SBI, Tisco and Zee Telefilms . The rupee ended the week at 45.76 levels ( - 00.35 ) against  the US $.

Derivatives highlights of Friday Nov 21, 2003.

Note - ** denotes lower levels over the previous session.

The put / call ratio stood at 0.21 : 1

The gross outstanding long positions were Rs 10,570 crs

The markets are nervous after the terror attacks, bribery charges and negative FII inflows hit the sentiments. The expiry of the November series will see higher volatility on lower volumes and a cautiousness in the undertone. The trading session on Friday saw a large number of stocks witnessing switching to the December series. So far, the mood was to square up positions in the near month series and not create commensurate long positions in the mid month series. The put / call ratio is seen more or less steady at these levels and the traded volumes are in line with the 10 day average. Of the entire weekly traded volumes, 63 % of the transactions were initiated on negative market breadth days. The market is likely to remain cautious due to the impeding state elections, the US markets are closed on Thursday and domestic markets on Wednesday. As we have been advocating, near Christmas, there is a higher probability of the FII inflows slowing down due to year end considerations and fund managers being away on leave. This pattern is a matter of routine and should not alarm investors unduly. What should be cause of concern is the cancellation of the TCS outsourcing deal by the Indiana state in the backdrop of increasing hostility by the US companies towards Indian BPO operations. This may adversely affect the sentiments in the technology sector which has a significant weightage in the markets.

The overseas markets are weak on account of profit taking, terrorism fears and year end redemptions. The coming week promises to be a range-bound one, till a clear mandate is received from the broader markets in the buy / sell direction - which is unlikely. 

The weekly bar chart of the Nifty shows a continued lower tops and bottom formation for the second week in a row and the index closing above the short term support of 1520. There are many minor supports for the Nifty on the downside - 1522 &1507. However, a more meaningful support is at the 1480 levels. On the higher side, expect resistance at the 1560 and 1577 levels. Only if the Nifty trades above the previous weeks high of 1591, will a short term upmove be expected. Till then, treat the advances as a dead cat bounce. The short and medium term oscillators are pointing to a fall and should the index fall below the 1500 level and close below it, the oscillators would signal a sell. Keep your ears to the ground where the price / volume actions are concerned.

Our outlook on the Nifty is that of cautiousness and aggressive trades be avoided at all costs. Protect capital.

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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