Down With The Budget?

The market showed signs of increased pessimism as B-day drew closer. Monday, was deceptively bright as the Sensex moved up by 58.30 points to close at 3580.29 on speculative support. BSES, ACC and Dr Reddy's were some scrips which witnessed FII buying. The Nifty went up by around 11 points to end the session on 1020.10 points.

Tuesday saw bull unloading on NSE settlement day. The reaction forced the sensex down to 3530.23 with an intra day low of 3504. The Nifty plunged sharply to close at 1000.75 points.

On Wednesday, end-session short-covering on BSE and new-account buying in NSE held the Sensex to 3528.44. BSES and ACC continued to see lots of action. The Nifty, on the other hand, went up to close at 1011.85 points.

 

Thursday, the Sensex moved down to 3494.3 points. Part of the pessimism was attributed to apprehension regarding the near inevitable fuel and freight hikes. The session was marked by total lack of FI and FII interest. The Nifty closed at 1003.10 points.

Friday saw more widespread selling coupled to very selective pivotal support. The Sensex closed at 3439.49 points while the Natex hit 1498.09 points. The Dollex and the BSE 200 closed at 154.24 and 332.49 respectively. The Nifty was held at 991.55 points.

Technically, lack of participation in cash scrips masked the true bearishness. The Sensex lost 2.35 per cent and Natex lost 2.20 per cent. The BSE 200 and Dollex lost 2.29 and 2.09 percent respectively.

The broader indices saw lesser declines. The 3500-scrip Allshares dropped only 1.8 per cent and the Medium Cap and Smallcap lost 1.8 per cent and 3 per cent respectively. Normally that would be a positve divergence but the breadth indicators were awful. The Advances versus Declines read 563 plus with 1155 minus and 303 scrips holding value. That means 1500 Allshares base scrips were untraded. A lack of quotes is even worse than an outright decline from the technical angle. Totally, close to 4500 scrips were unquoted.

All trading right now is dominated by Budget consideration and no one wants to get stuck in possibly illiquid counters. The market direction is down in the short term and that trend may get magnified soon because all the signs seem to indicate that the intermediate and long term trend are also down.

The intermediate trend is difficult but, a sequence of falling Sensex shortterm peaks and valleys has been established indicating a likely intermediate downtrend from that crazy 350-point swing session on January 16. The long term trend must be deemed negative. The market must climb over 3575 and establish itself there long enough to absorb strong selling pressure.

The test would be mustering buying support at 3575 on the way down. Currently dwindling volumes, and the latest decline from 3580 shows this is yet to happen. There would also be hope of the intermediate trend going positive if the market rises past 3605 on high volumes as that would reestablish a pattern of rising intermediate tops.