The Telegraph
Since 1st March, 1999
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Last Week

Over the course of the past five days, the sensex went from 3307 to 3284 — fall of 17 points in a week that was supposed to have delivered a great budget. The nifty did slightly better, but that was because of the inexplicable rise in all infotech stocks, mainly Wipro. I gather some big players were long on old economy stocks like the SBI and Bhel and short on infotech stocks.

When the budget disappointed them on the first set of stocks, they unloaded them and bought back the infotech stocks they were short on. Commentators, of course, are saying that there was buying in software stocks because tax concessions will continue. Infotech stocks have no earnings momentum and are over-owned. I doubt if they can lead the market up. If there was no genuine buying, we will see prices wilt over the course of this week — which in turn will be blamed on Iraq situation or that ubiquitous ‘profit-booking’.

Last week I had said that for the market to move up, it will have to pierce the 3320-3335 area with ease. Conversely, a close below 3280 may signal a change. Last Monday the market struggled up to 3341 by the afternoon. Interestingly, that day itself, when it seemed that the market was on its way up to hit 3368, it suddenly reversed and closed at 3322 and fell for the next two days. These are the real indicators that there is no buying power now. Only budget bullishness kept the market higher for the next two days. The budget day’s movement was even more telling. A high of 3317 (shade below the lower band of the difficult 3320-3335 area) and a fall to 3284, after briefly going into the negative territory. Not a very bullish sign though there is no indication of cascading fall either. A few indicators are, however, signalling a major movement round the corner.

Where are we headed' There has never been a more stagnant period than this. Five weeks ago we were at 3287. Last week we were at 3284. Foreign institutional investors are nibbling. Asia is an attractive destination. Far better than the overvalued US markets and the stagnant Europe. Local institutions are not selling. Big punters are clueless. Their big bets on Satyam in January and State Bank in February have turned sour.

Won’t the budget spark off a rally, after we have digested all the uniformly laudatory words' Well, businessmen were uniformly bullish as Jaswant Singh finished his speech. From Saturday morning they have started reading the fine print. There have been no across-the-board growth impulses for the corporate sector.

The government has made a mess of the dividend tax (flipping one year and flopping another year) which eventually leaves companies with less money. What has changed for the corporate sector'

This is not the place to analyse the budget. Erudite commentators have been doing this for the past three days on TV channels and newspapers. I had said last week it would be wise to stay out and watch what Jaswant Singh does and, more importantly, what the market does to the FM’s proposals. The market has not done much, no matter what Rahul Bajaj, Rajive Kaul and say. To me it is ominous.

Movement of Indices

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

One year ago       3562.21       384.64       1132.98       1142.05       767.60

One month ago       3567.84       384.13       1147.99       1046.20       751.95

One week ago       3307.20       390.35       1165.57       1066.15       763.20

Feb 24       3322.17       391.44       1168.97       1066.15       763.20

Feb 25       3281.92       387.34       1156.15       1055.55       756.55

Feb 26       3260.48       385.01       1148.87       1049.65       752.90

Feb 27       3277.34       388.22       1159.26       1052.95       757.90

Feb 28       3283.66       389.27       1161.63       1063.40       762.00

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