Ubi Not A Weak Bank On All Aspects: Cmd

The market found a temporary bottom in a truncated week of trading. As the Lok Sabha was dissolved on Monday, there was a huge drop of 161 points in the Sensex. Tuesday saw further losses before short-covering and investment buying brought the market around.

The Sensex ended the week on 3325.69 points which was a 2.38 per cent loss. The Nifty ended the week at 966.60 points which was a 1.6 per cent loss. The rupee stabilised around 42.80 versus the greenback after dropping below Rs 43 on Monday.

The dissolution of the Lok Sabha had been expected and the smart money has already discounted it although it caused apparent panic on Monday. But fears of a delayed general election could cause further upheavals. There are several critical meetings such as CTBT and WTO scheduled for the recent future. If elections are much delayed, the caretaker government will have to represent the national interest.

The story of the month has been the surprising commitment of the FIIs. Despite all the political uncertainty, they have remained positive in their approach and investment buying has brought in over $700 million. Of course, the bearishness had brought valuations down to attractive level in many blue chips. Surprisingly, the technical rally was not led by software and pharma stocks however. These lagged the general market trend.

Background and breadth indicators remained poor. Volumes were low. Advances were at 256 scrips up versus declines at 743 scrips with 46 scrips held at previous week's level. Broader indices showed differing levels of value-erosion. The BS Midcaps-100 dropped 0.56 per cent while the Midcaps -250 lost 1.36 per cent and the BS Smallcaps lost 2.01 per cent. The CNX S&P 500 showed a loss of 1.65 per cent.

The Sensex rallied above critical support at 3183 points which firmly continues a pattern of lower bottoms and tops that was established in late March after the recent market peak at 3817 points. The market has fallen along an incredibly steep minus 65 degree trendline since then. It is back near a level of stable support right now and should be expected to rally above 3159 points. It will hit severe selling pressure around 3450 points. So the short-term trend may see it range-bound in that 300-point zone. Next week could start with a small rally which moves the Sensex up another 100 points before it pulls back.

The interesting thing about this current phase is that pharma and IT seem to be losing some of their charms since these scrips have been hard-hit. There are also fairly large outstanding positions still alive, even though the levels have been reduced in this three-day week. The net outstanding position is long which means that there is still inherent selling pressure looming in the background. Despite low Badla, sooner or later tired bulls will unload. Meanwhile everyone awaits the Election Commission announcements with bated breath. The longer the Elections are delayed, the more dangerously volatile the markets are likely to get.