The Telegraph
Since 1st March, 1999
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Last Week

One market veteran (who has been long on Nifty futures for almost the entire length of the bull market and has made tons of money) tells me that that he has never seen a market move like this — a vertical rise of almost 800 points. We have had eighth consecutive week of rise and everyone is still looking for a correction.

The problem is, when everyone is looking for the same thing, the Mistress of the Market is sure to frustrate them, the principle being that the market will fool the majority of people all the time.

So, a correction will not come as long as there are too many eyes looking for it, too many voices of caution. There are no bears, of course. Everybody is looking for a small fall to be able to get in. The assumption is that we will make a healthy base somewhere around 3400 for a second round of rise towards 4000.

However, since there are too many people who are cautious and suspicious (like me), the market has inexorably headed higher. I have no clue now where we will end up with this move and what unfolds after that.

In purely fundamental terms, there is little room for growth for large cap stocks.

Fund managers and brokers repeat that fundamentals are attractive. However, they are never very clear as to why at Rs 770, ITC would be a good stock to buy.

Sometimes they offer a mishmash of fundamental and technical reasons, but they can never tell you when to sell.

The Sensex P/E is already 12 and the heavyweights — Infosys, ITC, Hindustan Lever Limited, Reliance Industries, Bharat Heavy Electricals, ACC — are not cheap. What will take the market higher and how, if not through new speculative bursts'

My friend is not wrong. I have reviewed more than 20 per cent market rises over the past 10 years and have seen nothing like this. Not a single big move (600 points plus) has happened without a significant correction.

This time we have had 750 point rise without any reaction. For whatever its worth, here are some thoughts. For the first time since mid-May, the market did not close at the high of the week, but somewhere in the middle.

While foreign institutional investors (FII) have bought heavily, domestic mutual funds have merely nibbles. If FII buying does not come next week, we may see the momentum flagging.

The heavyweights looking strong are ITC, Reliance, Ranbaxy, Tata Iron and Steel and Tata Engineering and Locomotive.

Hindustan Lever and Infosys have cracked already. The best that we can hope for is some sideways movement — if not a “correction”. Keep your fingers crossed.

Movement of Indices

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

One year ago       3316.77       400.01       1207.18       1070.55       788.60

One month ago       3181.97       409.67       1241.93       1010.65       812.20

One week ago       3583.06       449.05       1362.66       1125.55       888.15

June 30       3607.13       452.03       1373.56       1134.15       894.50

July 1       3604.43       451.87       1374.53       1130.70       894.00

July 2       3601.39       452.12       1377.74       1133.80       898.15

July 3       3639.89       456.98       1393.16       1144.65       907.45

July 4       3622.34       457.59       1395.80       1138.45       908.85

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