The Professional Ticker Reader TM

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Nov 29, 2003

Markets recover further. Sensex gains 206 points.

Higher volumes, positive breadth as old economy stocks rally.

Weekly statistics

The value of shares advancing was Rs. 21,241 crores and the value of shares declining was Rs. 5,177 crores. This indicates a broader buying bias. The total traded volume on the BSE was Rs. 8,354 Crores. The total traded volume on the NSE was Rs. 18,126 Crores.

The week saw a bullish sentiment prevail on the bourses as the markets ended with strong gains. This inspite of the trading week being truncated due to a holiday. The volumes were slightly lower than the previous week and the market breadth was highly positive in absolute and capitalisaton terms. The indices were seen testing their psychological barriers of 5000 and 1600 on the Sensex and Nifty respectively. FII investments were positive and the buying was broadbased as even the technology sector participated in the rally. The peace initiative by India and Pakistan was hailed by the market players who cheered the event by buying aggressively towards the latter half of the week. The Sensex was boosted by ACC, Bajaj Auto, BHEL, BSES, Cipla, Dr Reddy, Grasim, Gujarat Ambuja Cements, HCL Tech, HDFC, HPCL, Hindaco, ICICI Bank, Infosys, L&T, MTNL, ONGC, Ranbaxy, Reliance, Satyam Computers, SBI, Telco, Tisco, Wipro and Zee Telefilms. The Sensex was dragged down by Hero Honda, Hind lever and ITC. The rupee ended the week at 45.85 levels ( - 00.09 ) against the US $.

Changes in outstanding futures positions.

Note - The put call ratio is at 0.17 : 1.

The value of outstanding long positions (gross) is Rs 8,302 crs.

The markets are in a bull grip, riding on the back of robust institutional support - both FII and domestic. The inflows have taken the bears by surprise and forced them to cover shorts. This was also a part of the reason why the markets vaulted up so strongly. Of the entire traded volumes transacted on both the exchanges, the entire 100 % was transacted with market breadth being positive on all the days. That is a healthy sign for the bulls to take comfort from. The traded volumes were however marginally lower and that is a sign of caution. The indices are near their previous tops which may see some profit taking at those levels. We expect there to be profit taking at higher levels, especially in the latter part of the week since the markets have rallied strongly in the last few days. Weaker bulls may prefer to book gains atleast partially at higher levels. The technology stocks are likely to remain in focus as long as the US $ remains firm against the INR which boosts their forex income. That will limit the downsides due to the higher weightage on the indices. The derivatives positions show a bounce-back in the outstanding positions in the options segment from 0.24 : 1 yesterday to 0.17: 1 today. There has been a commensurate drop in the individual stock futures and that is a sign of decreased comfort levels on advances. Also noticeable is a sharp drop in the long positions in the Nifty calls and futures - the nifty is the most popular FnO play in the markets. In the international markets, the two worrying factors are rising interest rates in a few European countries and the sharp spurt in international gold prices. This shows a flight of capital from equities into gold - a defensive hedge.

The overseas markets have been firm on the back of expectations of a robust growth in the economies worldwide. The US markets have bounced but are still off their previous tops. Should they continue to exhibit strength, expect the global markets to take a positive cue from there. All in all, expect a bullish undertone to prevail but a profit taking preference at higher levels.

The daily bar chart of the Nifty shows a bounce back from the 1500 levels in the last fortnight as we had advocated in our previous editions due to the retracement pattern theory. That view has been vindicated as also our forecast in the pre market edition on Friday Nov 28, 2003 that the Nifty would face resistance at the 1618 levels. !! From here onwards, expect to see resistance at the 1635 levels and should the markets surpass this crucial point, expect the rally to go to the 1660 levels in the coming week. On the lower side, expect the support to come at the 1545 levels in the coming week. The oscillators are showing a scenario that needs a confirmatory rally to signal a fresh upmove.

Our outlook on the Nifty is that of cautious optimism. We do not advocate building aggressive long positions till a convincing breakout above 1635 is received.

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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