How far we do we go, I wondered last week and suggested that the medium-term target remains the 3360-3380 region (1080-1100 in the nifty).
On Monday, the sensex hit 3371, the nifty hit 1100 and turned down. Both closed below their previous weekly close, signalling the first weekly reversal in two months.
Does it mean we are headed down' It is impossible to tell — one of those periods in the market when you have to sit out and patiently watch bulls and bears struggle for every inch, going nowhere.
For whatever its worth, the tech index is swooning and all tech heavyweights (Infosys Technologies, Satyam, Wipro and Digital) stocks closed lower for the week, as did most cement companies and Reliance.
The stars of the week were banks (State Bank of India and ICICI Bank), pharma stocks and Tisco. So, overall we have a mixed picture. The index has mildly corrected. Stocks are rallying selectively while heavyweights that set the tone and direction of the market (Reliance Industries Limited, Hindustan Lever Limited, ITC) are idling. This is a perfect set up for a strong move either way. We need more evidence of the market’s mood. That evidence will come in the form of a renewed attempt to cross the previous highs. The sensex made repeated attempts to break through 3350 last week but failed.
Next week there maybe another attempt to cross the 3350-3370 zone. A successful crossover will take the sensex to 3450-3500 area.
That’s the best-case scenario. Last week the market effectively moved between 3350 and 3320 range though the print on the fringes were 3301 and 3356. The narrowing of the market band presages great volatility ahead. For the worst-case scenario, watch out now for a crack below the last week’s low of 3301.
Longtime readers may remember a mock portfolio we started a year ago. It was a 5 lakh portfolio that had the following transactions: 200 Dr Reddy’s at 930, 200 Bajaj Auto Limited at 370 (sold 100 at Rs 500), bought and sold 7000 Bank of India at Rs 22 and Rs 28 respectively and bought 1,115 Tisco at Rs 127. That left us with Rs 2,00,595 in cash all these months. I am now moving the entire cash into Tisco, a stock which is set to zoom in 2003. We will be fully invested having earned 17 per cent return in one year that saw the sensex rise by just 2 per cent.