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Last Week

The market put on another 200 points this week and closed almost near its weekly high. Incidentally, this was the second biggest weekly gain since the rally started in early May. These kinds of outsize gains, even after a 1000-point rally, is highly unusual. Where are we headed'

At the end of July I had said that the way Hindustan Lever, which is struggling to get things right in its business, shot up in two days even as all analysts have a sell rating on it, makes me sense we may have a huge uncontrolled run ahead of us. Especially above 3750, new buyers will emerge and we will be headed for a new high, possibly, for 4200.

That target of 4200 mentioned three week ago is now close. There is a big possibility that the index will top out between 4150 and 4200, probably on some insignificant event early this week. It could be the disinvestment issue.

My market sources tell me that a lot of very smart speculators have gone short on index heavyweights and Nifty futures, betting on a steep fall. The quality of the coming fall would be interesting to watch. Usually, the market can give up a few hundreds of points simply on the lack of buying from institutional investors.

The view would not have turned negative but a buyers’ strike simply can shave off quite a bit. From that point, selling by weak players who have come in at the fag end of the rally can make things worse.

We may be close to that point now. This may lead to significant correction, possibly all the way down to 3600 level, from where a fresh rally, may start.

On stocks, last week, ITC broke out of its long time resistance of 780 on significant volumes as did Hindustan Lever whose rise continues to baffle me. May be we will see robust numbers for the September quarter that will justify the price rise.

In fact, last week was once again the day of the big cap stocks. Tisco, Telco, ACC, Ranbaxy, Hindustan Lever, Reliance, ITC, Hindalco, ICICI Bank, Hindustan Petroleum Corporation Limited, BSES, Bharat Heavy Electricals, ACC, Bajaj Auto, Mahanagar Telephone Nigam Limited — all gained significantly.

I must make a special mention of the steel stocks that reached an intermediate climax last week. Last Tuesday Steel Authority hit Rs 61, a price level it has not reached in the last nine years, on a massive pump-and-dump scheme. It reacted all the way down to Rs 36.25 on Thursday before moving back up to Rs 40.

SAIL will record bumper profit this quarter. My estimate is that it will be about Rs 500 crore, double that of the June quarter. However, while there is no fall in either the demand of price of steel products and Steel Authority of India will continue to record massive profits, the incremental rise in profit will be meagre.

So, the December and March quarters will be great by comparison over the previous year but not in comparison to the September quarter. Those who bought early, may keep this in mind.

 

Movement of Indices
     
   Sensex   
   BSE 200   
   BSE 500   
   S&P CNK   
Nifty
   S&P CNK   
500
One year ago
3080.70
3080.70
3080.70
3080.70
373.45
One month ago
3554.13
3554.13
3554.13
3554.13
444.17
One week ago
Market closed
Aug 18
3977.73
3977.73
3977.73
3977.73
517.68
Aug 19
4006.91
4006.91
4006.91
4006.91
515.09
Aug 20
4056.60
4056.60
4056.60
4056.60
518.32
Aug 21
4095.35
4095.35
4095.35
4095.35
525.03
Aug 22
4125.12
4125.12
4125.12
4125.12
530.72
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