The Professional Ticker Reader TM

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Sept 20, 2003

Markets undergo extended correction. Sensex gains 89 points.

Lower volumes, negative breadth as disinvestment blues hit sentiments.

Weekly statistics

The value of  shares advancing was Rs. 15347 crores and the value of shares declining was Rs. 19456 crores. This indicates a broader selling bias. The total traded volume on the BSE was Rs. 10692 Crores. The total traded volume on the NSE  was Rs. 24137 Crores.

 The markets saw the correction gaining momentum as the markets turned distinctly nervous. The imbroglio of the HPCL & BPCL disinvestment added fuel to the fire as the investing community saw the court verdict as a hurdle to the reform process. The govts target from the PSU disinvestment is unlikely to be met in the current fiscal as the big ticket selloffs are now deferred. Traded volumes were marginally lower as the retail players preferred to wait and watch while the domestic institutions continued to press sales. The impeding expiry of the derivatives series also played a large part in the weakness seen. However, our investors will recollect that we had predicted that the Nifty will close above the 1300 levels ( click here to see previous weeks files ), which has been proved accurate. The Sensex  was boosted by Bajaj Auto, BHEL, HDFC, ICICI Bank, Infosys, L&T, MTNL, Nestle, Satyam Computers and Tisco. The Sensex  was dragged down by ACC, BSES, Castrol, Cipla, Colgate, Dr. Reddy, Grasim, Gujarat Ambuja Cements, HCL Tech, Hero Honda, Hind Lever, HPCL, Hindalco, ITC, Ranbaxy, Reliance, SBI, Telco and Zee Telefilms. The rupee ended the week at 45.93 (- 00.14 ) levels against the US $. The week has been completely in line with our expectations / projections.

Note - The put call ratio is at 0.23 : 1.

The major contributing factor in the trend determination for the markets in the absolute short term ( 3 days ) will be the outstanding positions in the derivatives segment. The second important factor will be the international markets which have made landmark gains as the US markets made intra-week highs which were the highest since May 2002. The Nasdaq is looking relatively stronger as compared to the Dow Jones, which makes the outlook for the domestic software sector positive. Since the immediate hurdle is the expiry of the derivatives segment, the switching / squaring up will be through by Wednesday on the outside. If the Nifty does not fall below the 1300 mark till that time, expect the worst to be over. Thereafter, the consolidation phase will commence and a fresh view can be taken on the long side. The HPCL & BPCL disinvestment factors have been digested by the markets and no further significant attrition is expected in the sentiments on that front.

The US economy is floundering it's way out of recession. We expect the I.T. spending to go up in the coming quarters and the steady interest rates seem to suggest that negatives have bottomed out for now. If the FII inflows continue to be healthy, expect the larger picture to remain optimistic. The put call ratio remains stretched in favour of the bulls which indicates that optimism levels are high. Overall expect the markets to see selling at higher levels, but the undertone to remain positive.

The weekly bar chart of the Nifty shows that the rising tops and bottoms formation has been reversed after a 7 week gap as the Nifty has closed lower for the second consecutive week in a row. The slower momentum oscillators are turning lower from over bought levels and that indicates an ongoing correction. Last week, we had advocated that the Nifty would not violate the 1300 levels on a closing basis ( click here to see previous weeks files ), which is the 38 % retracement from the top in the last leg of the run up as well as the short term moving average support. Should that level be violated on a closing basis, expect the next immediate support to be at the 1245 ( Aug 25, 2003 - Mumbai blast day lows ) levels. On the higher side, expect resistance at the 1375 levels above which the short term trend is bullish. The overall medium / long term trend will be bullish only above the 1432 levels.

Our outlook on the Nifty is that of positive buying support as long as the 1300 floor price holds on a closing basis.

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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