Market Continues To Trade Tight
The market sentiment may have improvedthis week but the indices didn't reflect it. Sebi'snew recommendations would be beneficial if they areimplemented fast.
The proposed introduction of stock futures and equitymargin trading coupled to institutional option tradingand limited short sales by institutions will address some of the worst problems.
However operators are also distinctly uneasy at the proposed turnover cess that will supposedly aid sick companies to recover. Thus after a rise on Tuesday, the market failed to overcome selling pressure and remained stuck inside a trading range.
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Resistance at3355-60 caused intra-day double-tops and this is a short-term bearish signal, which was immediately confirmed by the fall on Friday.
The Sensex closed at 3296.71 for a loss of 0.4 per cent. The Nifty closed at 1069.2 for a loss of 0.18 per cent. The Defty reflected rupee firmness by dropping only 0.16 per cent. The broad BSE 500 lost 0.26 per cent.
Volumes improved marginally during the truncated week and breadth was just slightly negative despite the larger losses in the BSE-500. The market's parameters remain tight.
There is support at the current closing levels and lower down around 3245. There is strong resistance around 3355-3360, and only a couple of closes above that level will cause anupside breakout.
The short-term trend is still trending sideways and that assessment won't change until and unless the market trades out of the 3245-3360 range.
The intermediate trend is still bearish although it shows some signs of easing. A Fibonacci signal of a possible turnaround this week failed.
Perhaps it could still come through next week if the market opens bright. There is no confirmation of possible market direction from an array of indicators.
RSI, ROC, Moving Averages - every indicator is producing ambiguous signals. The only indicator is time, - the intermediate trend must change in another 2-3 weeks. It could however move sideways or flatter only to deceive.
The selling pressure this week was mainly institutional and there was pressure on heavyweights. A small rise on the first two days triggered hammeringacross stocks like Reliance, Reliance Petro, HLL and ITC.
Among the honourable exceptions were HDFC and HDFC Bank. Hero Honda and Ashok Leyland also saw accumulation and Telco bounced off lower levels.
ICICI may also have bottomed this week. Ranbaxy seems to remain in a small uptrend after being re-rated by the market on the back of its overseas prospects.
Smithkline Consumer and Reckitt bucked the downtrend as well. Thomas Cook revived as news spread about Sebi's activism on the Open offer Ice remains a big black hole. Perhaps SSI could rise alittle further.
Balaji Tele and Mukta Arts received bad news in that liquidity will be affected after August 20 as trading will then become delivery-based. The big IT stocks saw both FII and FI disinvestment.
Communication stocks also lost ground towards theweekend. A few smaller media stocks, which are stillnot in rolling saw speculative forward positionsbeing created.
To recap, the market sentiment may have improvedslightly but operators are still sitting on the fence.If the Sensex closes above 3360 in the next week, wewould definitely see a short-term revival and quite possibly an intermediate reversal.