The bull powers ahead. Massive buying by foreign institutional investors (or those falling under that broad category) has pushed the sensex to a new high since March 2001. The week was a real roller coaster. The market opened on Monday with a big downward gap and fell further. Then suddenly buying emerged and sensex was up at 3832.
On Tuesday the market opened marginally higher and kept on going up till it reached 3879 when huge selling emerged. The index crashed to close at 3765, a fall of 118 points on an intra-day basis. The following day sensex opened lower at 3755, went all the way to 3799 and collapsed to 3722, when some buying and short-covering took the sensex up to 3742. The two-day fall unnerved the bulls, gladdened the bears and made neutral observers sit up. Suddenly, sensex movements seemed to be maniac.
There was nothing in the news to warrant a 150-point fall in two days. Neither was there anything to warrant what happened the next two days. On Thursday, the index opened marginally higher, fell a bit and started snaking upwards. Once the momentum picked up, there was no stopping it. It took out all the resistances one by one — 3750, 3780 and even 3800.
The rise happened on lower volumes. But then, who cares about that in a bull market' What happened on Friday was even more eye-popping.
The index opened with a bull gap, retreated a bit to 3840 and then kept going up, right up to the morning high of 3854. It struggled there a bit, climbed over 3860 and made a spectacular assault in the last 45 minutes, easily rising over Monday’s high and closing at 3884, a rise of 69 points for the week. Nifty did better, because public-sector companies which populate Nifty, rose sharply last week, especially on Friday.
Buying is still relentless and the sensex, barring a major external event, is headed for 4050 as a tentative first level in the current run-up. Any fall before that could be a buying opportunity. The move could go beyond 4050 and stretch all the way to 4200, a point where the market will be overbought and, therefore, be very vulnerable to negative news. Till then make merry.
Fortunately, the stocks I have suggested did well. Glenmark is up (it is a big long-term bet so short-term price movements mean little), Rain Calcining shot up last week on aluminium price rise on London Metal Exchange and steel stocks are on fire. I forgot to mention Sesa Goa, a company that supplies iron-ore to steel mills, has enormous pricing power now and has been raising prices with ease. The stock has moved up sharply but has lot of steam left.
In the last two days of the reporting week the market was powered by Hindustan Lever and ITC, two index heavyweights. There is still not much growth momentum in these two large companies. A rising tide lifts all boats but from here on, to make money, investors will have to be much more selective.