The Telegraph
Since 1st March, 1999
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Last Week

The market hoodwinked me in the previous week, showing a minor weakness and was up on its way to the first target of 3030. It crossed that with ease and is now likely to move up to 3100. I had mentioned last week that it was very unusual for the market not to retrace at least 40 per cent of the downmove (from 3222 to 2904, a 314-point fall). It took time but now we have had a 50 per cent pullback and a 100-point move up last week.

Looks like we are headed for at least 3100 or, in the best-case scenario, to even 3140. What took the market up last week was a host of stocks that have remained subdued for many months and even years now. ABB, Bhel, Colgate, Dabur, Glaxo, ITC, M&M, State Bank, Tata Tea, Tata Power, went up with gusto on hopes of better earnings prospects.

We also saw corrective rises in weak stocks such as Hero Honda, HLL, Reliance, ICICI Bank, Infosys, Satyam, VSNL and Wipro. There was hardly any stock that fell during the week. In that sense the 120-point from the intra-day low of Monday was very broad-based, very strong.

As it is, all other indices (BSE 200, BSE 500 and nifty junior and nifty 500) have seen a very strong move over two weeks now. Hence, we will see minor bumps on the way up but the direction could be up for about 7-10 more days. If we reach 3140, we will hear market participants saying that the worst is over. And that we are on a new bull market.

Unfortunately, I do not see it that way. We will head down, once again led by software stocks and some key old economy stocks. I do not see HLL, Reliance, Infoys HCL Tech (and Wipro in the nifty) able to pull ahead much. ITC will probably peak out at 730. The current run up is on expectations that monsoon will be fine and that all stocks other than software stocks (especially auto and consumer goods companies) will do better than last year.

This is a fair expectation but unfortunately, it does not take into account the real reason for the poor performance of these companies: over capacity and lack of pricing power. Will a better monsoon change that' We will see.

Last week’s rise was impressive price-wise but not volume-wise. Not for a single day last week did the market close up on above average volumes. Unless higher volumes accompany the move up to 3100 and beyond, the rise will continue to look suspect.

Movement of Indices

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

One year ago       3355.61       403.54       1200.36       1092.80       774.20

One month ago       3032.32       360.03       1080.45       958.65       705.90

One week ago       2950.00       360.08       1087.28       937.85       710.35

May 12       2942.78       361.97       1095.63       936.00       715.75

May 13       2960.62       365.13       1105.27       944.20       722.65

May 14       2993.94       368.38       1116.96       952.15       730.05

May 15       3012.97       373.42       1132.57       959.85       740.20

May 16       3056.58       379.47       1149.70       973.10       750.25

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