The Telegraph
Since 1st March, 1999
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Last Week

Seven weeks and still rising. How far do we go' The medium-term target remains the 3360-3380 region (1080-1100 in nifty). If the market blasts through these levels, as it has through all other resistance levels so far, we may hit 3450 in the sensex and 1140 in the nifty.

That would be a serious level for the market to deal with. It may be a ceiling for some time unless we have some seriously positive news flows supporting prices at those levels. What will take us there' Reliance Industries Limited, ITC, Telco and State Bank of India. All these look very strong as does Infosys (and Wipro in the nifty).

Meanwhile, last week again the market closed at the high of the day and the week as well, an extremely bullish formation. This has been the trend over the last three weeks. Last week’s rise was not supported by huge rise in volumes but the net foreign institutional investors (FII) investment has turned solidly positive. I expect the market to open high today and race up further on the expectation of a Bhartiya Janta Party win in Gujarat.

The market will interpret the BJP win as a signal that economic reforms (what is that') will gather steam, including the hopes that privatisation will pick up pace.

Will it' Maybe. The market is nicely trending up but a rally further from these levels, we need the continuity in the flow of good news that we have seen so far (software sector, auto sector, privatisation etc.)

The BJP victory would be one. But beyond the temporary bullish sentiment, what will it do to the fundamentals' Purchasing power is not improving and pricing power remains poor. Company after company is reporting stagnant sales.

The sensex P/E is close to 12. The best ones (like Infosys Technologies) are fully valued. The worst ones (NIIT, Zee) are overvalued. On a fundamental basis, the index stocks will soon start looking stretched.

Outside the index stocks, of course, many stocks remain undervalued. Some of these have just started to make their moves like Hindustan Inks, Jindal Power and Steel, Glenmark Pharma. While nobody is talking of the downside now, when a rally is well underway, it may be worthwhile to remember some reversal levels.

A failure to stay above 3360 and a weekly close below 3340 may be one sign of weakness. As of now, the ferocity of the rally is suggesting another positive week.

Movement of Indices

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

One year ago       3388.59       355.62       1049.40       1098.75       729.40

One month ago       2960.66       357.12       1063.52       962.65       698.25

One week ago       3306.29       161.08       1161.08       1069.80       762.50

Dec 9       3269.31       382.59       1141.62       1058.65       751.85

Dec 10       3289.68       384.98       1148.28       1063.70       754.00

Dec 11       3303.27       386.04       1151.58       1069.75       757.65

Dec 12       3324.48       388.15       1157.66       1077.00       761.30

Dec 13       3342.97       391.64       1167.92       1086.20       768.45

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