The Telegraph
Since 1st March, 1999
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Last Week

The bull run continues with the sensex closing the week up by 63 points and Nifty up by 21 points. But looks can be deceptive. The market breadth (advancing shares versus declining shares) was negative every day of the week — in some segments, even on the day the sensex rose by 60 points. Many smaller stocks are wilting, in the absence of institutional buying.

Besides, over the five trading days that the sensex was up by 54 points, the entire rise (and more) of the week, came from just one day’s trading gains when software stocks flared up in a great example of the latent buying power of small punters. On the positive side, the declines were shallow. It is a mixed picture. Investors are still keener to buy at positive news than to sell and that should prevent the market from dramatically reversing its two-month old rise. The overall market, however, looks tired.

Software stocks turned out to be a one-day wonder, a phenomenon that probably signifies the dying love affair of investors with these excellent companies and once, growth stocks. I do not know if this mixed picture presages something but is worth keeping it in mind that it may resemble indecision among big players.

The big event of last week, that created ripples in the market was Infosys’s results. actually, it was not the numbers, like the net profit or the operating profit, which were the centre of attraction. The key event was how the market reacted to it. Punters went delirious even as top Infosys executives sat dourly on CNBC discussing the minute details of their numbers.

Here is our take on the Infosys results that the TV channels and the business press went raptures over: volume growth is meagre, pricing pressure continues and net profit was contributed primarily by other income and lower depreciation. That did not prevent the scrips of half-dead companies from shooting up. I had started a mock portfolio here early last year. It was substantially in cash at various times but moved into a fully invested position in December last year. Over 18 months I have bought just four stocks. I bought and sold Bajaj Auto and Bank of India. I now have Dr Reddy’s and Tisco.

The portfolio is up 50 per cent in 18 months and 30 per cent in seven months, when the index is almost where it was. The portfolio did not chase the flavour of the month, did not go for derivative, did not go for unknown companies. This underlines my belief that good returns are available everywhere, that retail investors should not invest in index funds and that the best strategy for stocks picking is being very selective on the stock as well as the price. As usual, from here on, irrespective of where the broader market is headed, hundreds of stocks will give great returns. Keep an eye on engineering, cement, steel and pharma stocks. As for the broader market, the topping process may have started. The downtrend will be confirmed when the sensex decisively goes below 3640.

Movement of Indices

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

One year ago       3290.56       394.85       1190.52       1056.60       779.20

One month ago       3289.55       413.14       1253.33       1037.80       820.60

One week ago       3622.34       457.59       1395.80       1138.45       908.85

July 7       3612.53       460.55       1406.86       1140.55       915.70

July 8       3629.68       458.68       1400.57       1145.90       912.50

July 9       3620.79       455.46       1387.91       1141.05       904.70

July 10       3679.63       461.47       1405.19       1162.35       914.80

July 11       3676.26       461.52       1404.80       1161.65       915.50

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