Market Sees Technical Recovery

The market performed a sharp technical recovery this week after the big decline over the last fortnight since the WTC attack. This was classic behaviour with the price recovery spurred by a combination of bargain-hunting and the re-entry by FIIs and FIs on the basis of stabilising oil prices.

The BSE Sensex rose by 8.13 per cent, closing on Friday at 2811.6 after hitting an intra-day high of 2830. The Nifty was up 6.98 per cent to the 913.85 closing level. The broad-based BSE 500 was ahead by 7.37 per cent at 850.56 points.

The Defty was boosted by a rupee comeback and also rose by 7.29 per cent, thus outperforming its rupee twin, the Nifty. Breadth indicators were reasonable with advances matching declines. Volumes rose marginally through the week.

The intra-day bottom during this period was at 2594 on Friday 21 September, and this is an 8-year low. The market has several times tested levels in the 2594-2630 level and it seems that there is fairly strong support available at these levels. It would take another big political shock to shift the market lower.

However, this seems to be a technical bounce rather than the beginning of a full-fledged trend reversal. Volumes haven