Market Records Modest Gains

Trading remained upbeat through the week and pivotals continued to register modest gains. Despite some profit-taking in the last two sessions, the market ended in the black. Buyers were selective however, picking and choosing between specific new and old economy stocks.

The Sensex closed out the week at 3,016.84, with a gain of 1.94 per cent. The Sensex rose by roughly 10 per cent in seven straight sessions before losing out to profit-booking on Thursday. The Nifty showed a similar pattern closing the week at 976.65 with a gain of 1.7 per cent.

The rupee remained more or less stable at around Rs 48.03 and the broad-based BSE500 gained 2.4 per cent on the week. Trading volumes showed some improvement although they were high during the sell-off on Thursday. The breadth of the market remained balanced with Advances outnumbering Declines slightly.

While tech stocks emulated a Nasdaq comeback, Old Economy stocks especially of Indian pharma companies benefited from the anthrax scare. Ranbaxy, Cipla and Dr Reddys may benefit if the USA relaxes norms for the sale of Ciproflaxin. Pivotals such as Wipro and ITC showed better than expected result in Q2 and Polaris Software also exceeded expectations.

Infosys Technologies and NIIT were amongst the IT majors (apart from Wipro) that rallied this week. Infy has recovered by over 35 per cent from its 52-week low of 2,156 on 3 October 2001. It has gained 22.35 per cent after the Q2 results. Speculators are also targetting Satyam which will release Q2 results next week.

Automobile stocks may see upheavals next week following a Mumbai High Court judgment that polluting vehicles should use LPG/CNG as fuel or be scrapped. The high court has also set deadlines for phasing out old taxis, three-wheelers and other transport vehicles.

The market has now been in an uptrend since the nosedive of September 12. It has achieved the maximal target of 3050 after rising from a low of 2600 and it is now encountering resistance. This resistance could continue since there is a big post-WTC gap on the charts at 3068 levels.

Technically this could be called an intermediate uptrend since we have seen a pattern of rising peaks and troughs for roughly a month. Intermediate uptrends can continue for between 6-12 weeks.

The short-term trend is also bullish. We have already seen one reaction to around the 2980 levels on Thursday. That is the first level of support.

In case the short-term trend sees a reaction, the market could fall to around 2830. Below 2830, the intermediate uptrend would be liable to reversal. So 2830 would remain the critical mark on the downside.