The sensex broke out of the 3370-3380 range in the last two days of the week and closed above a tad below the round number of 3400. The nifty moved up too and closed below the round number of 1100. Now that a fresh uptrend has started, are we going to get another blast of rise next week'
Quite possible, though in pure probabilistic terms, the chances of a continued rise without a meaningful correction is getting lower and lower. Of the major factors that were supposed to have created the fresh rise (thanks to the drumming of the media), one is over:
Reliance Infocomm’s so-called national rollout of telecom services. It was a damp squib. Nothing is going to happen till April next year and even then there are lots of ifs and buts about the success of the project. Reliance closed down almost 1 per cent, virtually at the low of the day, though its up-trend is yet to be decisively reversed.
One other bullish factor is the meeting of the cabinet committee on disinvestments, which may not be such a great market-booster after all given the various pulls and pressures (I wrote this piece on Friday). The international markets are wobbly, though that is beginning to have less and less of impact here. The Kelkar committee proposals on direct taxes are worth getting enthused about though its adoption will wait till the budget.
The bullish factors are looking scarce even as the market looks overbought.
However, even if we do get a sell-off, multiple layers of support sit below. The sensex will be supported at the 3360 level first, then at 3300 and eventually at 3250. Are we going to go that far in the event of a fall' Of the sensex heavyweights, ITC and Hindustan Lever Limited look unable to carry their weight anymore though ITC still looks undervalued given its new growth traction.
Hindustan Lever has little steam to pull the index ahead. Reliance, State Bank of India, the cement stocks and the software stocks will have to do their bit. Maybe they will. We will know in a day or two.
That said, the general bearishness of the past few years has thrown up plenty of opportunities to pick small-cap stocks at great prices. Over the last few weeks I have mentioned some of these (Jindal Steel, Hindustan Inks). One more I had in mind all these months but had lost track is Glenmark Pharmaceuticals. It is doing well and is available cheap. CG Igarishi Motors is another great company at bargain basement prices.