The Telegraph
Since 1st March, 1999
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Last Week

Last week I had written that I could hear the snarl of the bear. The sprightly young bear has taken his first swipe this week at the tired and old two-and-a half-month bull. The battle, however, has just started with many unthinkable events, both good and bad, slated to unfold over the next few weeks. On Friday, the first of the big unthinkable bad news hit us.

At the end of the day, Infosys and Wipro were both down 8 per cent, NIIT down 7.5 per cent, Digital down 6 per cent, and Satyam down 4 per cent. The great Indian software story looked suspect all over again. Surprise, surprise, have we not been dancing to the drumbeat of analysts, fund managers and the media pundits how the pricing pressure is gone and software story is looking good again'

The story is not suspect at the core, what was suspect all along was the marketís over expectation. In that sense, todayís fall was merely reality check. More reality check will come soon in the form of average results of the old-economy companies, average results of other software companies (Wipro, Satyam and Digitalís results would make Infosysís results look great by comparison), global geo-political situation and the eventually the budget blues.

However, the bull is not going to give up soon ó and it will eventually prevail in the third phase. We are probably at the second stage of the battle, the first going decisively in favour of the bull, which pulled the sensex up from 2828 to 3417 (on Friday).

The second phase (a short pullback) may have begun last week when the indices reversed sharply after making their fourth attempt to scale 3400 and 1100. Where are we headed' Probably 3300 then 3250 and sub-3200. What will take us there' Probably the heavyweights that moved the last i.e Hindustan Lever Limited, ITC, Bhel, ACC etc. All these are looking weak to me. The only strong stocks in the market are Reliance (it reversed on Thursday), Tisco, Telco and State Bank of India. These may prevent a major fall in the index right away, though till Thursday evening even the software stocks looked extremely strong too.

To reiterate, as of now, we are still on a medium-term uptrend and after the current correction is over we are probably headed for the 3800 zone. At that level almost all sensex stocks will be fully valued to overvalued.

Movement of Indices

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

One year ago       3381.96       351.10       1050.60       1098.20       718.40

One month ago       3289.68       384.98       1148.28       1063.70       754.00

One week ago       3357.54       394.68       1177.94       1089.60       773.95

Jan 6       3334.89       393.50       1173.57       1084.35       771.15

Jan 7       3330.50       393.70       1174.47       1081.80       771.20

Jan 8       3357.87       394.98       1179.43       1089.35       774.65

Jan 9       3384.20       399.43       1193.05       1097.35       783.65

Jan 10       3358.99       393.45       1175.71       1080.25       772.60

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