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Last Week

Last week I had said we now have seen almost a 200-point rally from 2930 level spread over two weeks and the sensex breached the 3100 level with impressive vigour and moved towards the next short-term target of 3150. I had also said that the best-case scenario would be a surge or sideways action on Monday and possibly Tuesday afternoon, followed by a move down. Luckily, the sensex followed that pattern, with a surge on Tuesday followed by a reversal later in the day when the sensex fell back below 3100.

However, that did not signal a change in trend as I was expecting. the sensex hovered below the 3100 level for two days and then moved up on Thursday in a late rally. This was followed by a truly vicious rally on Friday that left a lot of people including me perplexed. I had said that Reliance Industries should break free from Rs 250, HLL from 184, ITC from 700 etc. for this move to go higher. We got all that on Friday.

The sensex closed above the 3150 level great volumes that left investors pleased and wanting for more. We will get more I guess. The short-term targets now would be above 3200 where there may or may not be a pause. Frankly I have no guesses where this market is headed because I suspect it is being manipulated.

Last week I had suggested that the volumes in the Infosys counter suggests the involvement of an operator. Market rumours indicate that a big player of 1999-2000 who went under when the bubble burst, is trying to make a comeback — from Calcutta. He is being aided by an aggressive fund manager and a big business house.

The trio look so formidable to me that stock prices can go anywhere in the short term. In a calculated game, the syndicate has ramped up the index on Friday targeting stocks like HLL, the two Reliance companies and software favourites like Satyam, Digital and Infosys.

The idea is create a rally in the indices first so that a momentum is built up of retail investors. Of course, all this is rumour. If you want a ride, you must join in right now when the rally is at its initial stages.

I would prefer to sit out. The market is now characterized by unfavaourable valuation and favourable trend. At Rs 186 Hindustan Lever is not a buy, neither is Infosys at Rs 3600 or Wipro at 1270 or HCL Technology at Rs 200, having just announced a sharply falling profit.

As I said last week, there are too many negatives to hit us over the next few months and it will be hardly prudent to jump in now.

To update another aspect of my last week’s observation, we have broken out of the 10-12 day trading cycles last week.

For the fourth week in a row the nifty close up and the sensex as closed up for the third week in a row.

While there is no headline news of compelling bullishness there is obviously the force of liquidity that can keep prices going higher. How high now, and how low later, we shall see.


Movement of Indices

       Sensex       BSE 200       BSE 500       S&P CNX Nifty       S&P CNX 500

One year ago       3286.87       340.36       999.71       1064.15       698.10

One month ago       2987.65       361.62       1082.24       958.90       706.65

One week ago       3119.18       375.94       1124.16       995.20       734.95

Aug 26       3123.60       377.66       1128.63       998.85       738.45

Aug 27       3097.85       373.79       1116.76       987.70       730.95

Aug 28       3099.38       373.99       1116.84       985.70       730.25

Aug 29       3114.16       371.58       1109.11       987.25       725.80

Aug 30       3181.23       377.70       1126.92       1010.60       737.15

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