The Telegraph
Since 1st March, 1999
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Last Week

The rally continues, on the back of fresh positive news about disinvestment. Last Thursday, when the bull run just seemed to falter, came the news that the government, after all, has been able to break the deadlock over disinvestments with a formula that will see Hindustan Petroleum sold through strategic sale and Bharat Petroleum making a public issue.

Investors, in an ebullient mode for weeks now, interpreted this news as a very bullish development for the market as a whole. Stocks like MTNL, ACC and others were chased. The sensex shot through 3300 and stayed there, while the nifty, weighed down by the expensive Wipro, closed below the high of the week, but still substantially above the previous week’s close of 1050. The correction that I was expecting, came on Tuesday and Wednesday (actually just Wednesday because even on Tuesday the market never went below the weekly close.)

That severe fall (especially in the nifty) was reversed on Thursday itself and was followed by a blowout Friday. What next' There are conflicting signals. The sensex’s close above 3300 suggests that the rally will continue till 3,400 level or the previous top of around 3366, after which we may see a 150-point correction.

The nifty, however, is not giving a comparable signal. It failed to cross the weekly high and closed below even its Monday’s high. Nevertheless, both the nifty and the sensex look overbought to unprecedented levels. What about other indicators' Two of the other pointers look negative. Institutional investment has been absent for the last 120 points of this rally. In fact, the last 70-point rally has happened in the backdrop of substantial institutional sales. They have taken money out as punters and small investors swarmed in. The other warning indicator lies in the volumes. As the prices have moved up, volumes have shrunk.

These factors, against the backdrop of a highly charged and sharp rally over weeks, normally make for a short-term market top. That said, the top can stretch for days with little driblets of good news keeping the rally going as more and more investors buy the pullbacks. We may even have another huge surge if BJP wins in Gujarat.

Longer-term, the trend is higher. But what may act as damper are the geo-political situation, the budget blues, the role of RSS and VHP after Gujarat and — if my skepticism is right — the actual fate of disinvestment. I am not convinced that we are going to see the kind of disinvestment that the market would like.

There is a possibility that ONGC may be allowed to bid and take HPCL. BPCL’s price rise on Friday was baffling. If it makes a domestic issue, it means equity dilution and that is bad for the stock price it made no sense why it should have shot up. But then, who can argue with a bull run'

Movement of Indices

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

One year ago       3431.57       359.75       1061.62       1110.45       737.15

One month ago       2982.39       356.72       1063.39       962.30       698.40

One week ago       3228.82       379.33       1130.20       1050.15       741.55

Dec 2       3270.36       386.87       1154.17       1067.90       757.80

Dec 3       3230.14       381.33       1136.97       1055.00       747.30

Dec 4       3207.36       376.17       1122.04       1036.40       736.75

Dec 5       3229.73       379.31       1131.75       1045.95       743.55

Dec 6       3306.29       389.34       1161.08       1069.80       762.50

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