The Telegraph
Since 1st March, 1999
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Last Week

Once again, the revival was weak and lopsided, that should disappoint diehard bulls and caution for reluctant bulls like me. The sensex moved up seven points and the nifty was up by six points for the week. In short, no follow up buying and volumes have shrunk.

The bullish signals are fading throughout the week the sensex struggled to get past 3000, hitting 2994 in three of the four days, ultimately giving up, to close morose at 2956.

The decisive rise that was the hallmark of the previous week has been halted. Is it a temporary halt on the further upward march as everybody seems to be predicting in business papers and TV channels' The fact is that the index is gently bending down a picture that has been so familiar this year.

A week or two of hesitant rise, followed by a sharp fall. It has happened six times since February. Will it be any different this time' The chances are high that we will see a fall over the next week or so. The only problem is that I have no sense what will take the market down. Reliance seems to have attracted a lot of buying after its gas discovery.

The software stocks, that are weighted by more than 25 per cent in the nifty and 20 per cent in the sensex, have either found a floor or are in a distinct uptrend. Hindustan Lever Limited has probably seen the worst (temporarily) while there seems to be little additional selling interest in Mahanagar Telephone Nigam Limited, Bhel and State Bank of India.

What will take the market down' Maybe a couple of events. One could be an escalating tension over Iraq that a freshly victorious George Bush seems to be keen on precipitating. The US markets too seems to be topping out after a stunning rise in October against deteriorating economic conditions.

One other factor that may favour the bears is excessive bullishness. Once the bottom was made at 2828, we saw a sudden chorus of bullishness. The same chant of undervaluation, solid economic growth, November being the bottom and the rest. These arguments, of course, range from the false to the fallacious.

Corporate profits of large companies have been erratic (growth sectors have done badly and out-of-favour commodity sectors have done better) and the benefits of economic growth is going to smaller listed and unlisted companies, not to large corporations in the sensex. Excessive bullishness leads me to suspect that we are in for a fresh downturn.

A fall at this stage may slice 200 points from the sensex. At 750 or thereabouts we may see a bottom that will probably hold for a long while.

For the run up to continue, a reversal to the upside must start now and the index must close above 3000 this week.

Movement of Indices

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

One year ago       3059.97       315.92       931.26       997.70       642.35

One month ago       2973.35       356.85       1065.04       960.80       697.70

One week ago       2950.58       355.41       1058.83       951.45       695.20

Nov 4       2987.58       358.84       1069.27       962.10       700.70

Nov 5       2982.39       356.72       1063.39       962.30       698.40

Nov 6       Closed       Closed       Closed       Closed       Closed

Nov 7       2975.26       356.31       1062.02       960.70       697.25

Nov 8       2956.84       355.96       1060.80       956.95       696.35

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