In A Bear Hold

The pre-budget rally has not materialised this year. Over the years, the Nifty has risen prior to the announcement of the Budget.

However, contrary to expectations, the markets have actually been on a decline. The Nifty has fallen from 1057 levels to 1036 for the week ended February 14, 2003. The worrying factor was that the decline was broad based with only 10 stocks out of 50 recording an increase in prices. Volumes also fell dramatically, reflecting the weak sentiment that prevailed in the market. The reason for the decline is not fundamental.

According to BS 200 data, the aggregate sales figure has shown a 13.87 per cent increase for the third quarter. Even the IT sector, that had taken a beating in the aftermath of the meltdown in 2000, has shown a healthy 21.3 per cent increase in net sales.

 

Therefore, all the fundamentals pointed towards an improvement in the sentiments. The stock markets seem to be heading for a free fall because of the possibility of a war breaking out between the United States and Iraq.

Traditionally, whenever the US has gone to war, the stock markets have risen. This is because war leads to enhanced expenditure on the part of the United States, that has a multiplier effect on the world economy.

However, the present war may affect the oil prices that may have a recessionary impact on the world. Hence the fall in the Nifty. The sentiments are not likely to improve in the near future.

The advance to decline ratio was less than 0.5 for 12th February 2003. The decline in volumes signals a lack of depth and therefore,support for the market at lower levels. Therefore, going by technical indicators, the Nifty could see a further decline this week.

Hero Honda

Last close: Rs 237.5

Previous close: Rs 205.85

Week's high: Rs 231.83

Week's low: Rs 206.05

Future close price: 206.99,209.45,0

Last week avg. turnover: Rs 5520 crore

Previous week avg. turnover: Rs 1258 crore

Number of up/down moves: 0/4

After a smart recovery in the stock following its introduction in the derivatives market, the stock resumed its downward journey. As a result, its price slid 15.38 per cent over the week. According to market reports, this activity was caused by a single seller. The substantial rise in volumes that accompanied the fall indicates that prices may move down further. Technical analysts say that the stock has strong support at the Rs 200 mark. Therefore, barring exceptional circumstances, the stock could hover just above the Rs 200 mark in the next few trading sessions.

The sentiment has turned negative in the stock as the company has been losing marketshare to its rivals in the past few months. The fact that it manufactures motorcycles only means that there is no product diversification. Therefore, analysts too are not bullish on its growth prospects.

According to some media reports, the company is also planning a cutback in production due to the huge inventory piled up at its dealer