The Telegraph
Since 1st March, 1999
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Last Week

What pre-budget rally' Are we headed up' The index is in a no man’s land, waiting for a trigger. There are great expectations from the budget, rather great expectations for a pre-budget rally. After all, the market always moves up before the budget, right' Really'

Let’s put some facts on the table. In 1994, sensex fell by 500 points between January end and February end. In 1995, it fell by 140 points. In 1996, it went up by 400 points. In 1997, when the budget was in July, the sensex went up by 50 points. In 1998, when the budget was in June, the market fell by 320 points. The next year, the market, at the early stages of a major bull run fuelled by global liquidity and software boom, was up by 75 points.

The next year, at the height of the bull market it was up by 240 points. In 2001, it was down by 80 points. Last year, the sensex was up by 250 points. So, in our sample of 9 years, the market has been up 5 times and down four times.

Absolutely random outcome. As any elementary textbook of statistics will tell you, perfectly consistent with chance.

To make it perfect (50:50), this year the market should be down (five times) in a sample of 10 years! But then, catch any broker or financial journalist or a commentators on TV with a textbook of statistics. However, as retail investors, it maybe good fun to shoot back at your broker who is pushing for a ‘pre-budget’ rally with the following: ‘What pre-budget rally. Show me how many times it has happened.’ It will bring in some discipline to cavalier investment advice being bandied about.

I am not certainly claiming that at the end of February, the sensex will be below the January level of 3250. It may well be higher. This week we will know whether we are headed higher.

Over the week, the market moved in a narrow band and closed just 29 points higher. It is a mildly encouraging rebound from last week’s low of 3199 but next week’s the market has to move beyond the strong resistance at 3110 level if the hesitant up trend has to continue. I am unable to see what will take the market higher.

May be Reliance Industries and ITC will, with support from Hindustan Lever Limited, State Bank of India and Mahanagar Telephone Nigam Limited. I would not bet on it though. For whatever it is worth, the rise from 3250 level was on thin volumes and therefore extremely vulnerable to fall.

Movement of Indices

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

One year ago       3436.94       372.29       1096.22       1110.45       746.10

One month ago       3330.50       393.70       1174.47       1081.80       771.20

One week ago       3250.38       382.87       1143.43       1041.85       749.10

Feb 3       3279.83       386.80       1156.14       1055.30       756.85

Feb 4       3278.13       386.87       1156.45       1054.80       757.10

Feb 5       3256.08       385.17       1150.96       1047.40       753.10

Feb 6       3305.44       389.90       1164.47       1063.60       762.50

Feb 7       3279.77       387.49       1157.61       1057.50       759.10

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