Corporate results fail to cheer

MUMBAI NOV. 9. Stock prices are expected to remain range-bound as there is no indication of any sudden uptrend. Eventhough corporates — especially the manufacturing companies — came out with good financial results for the half year ended September 30, 2002, it failed to enthuse market sentiment.

"The Sensex is delicately poised with 2950-2995 as immediate range. Resolution of this range on the lower side should see 2900 as strong support and on the upper side 3040 as strong resistance. Thus, a range bound market remains the most probable scenario in the days ahead'', said Saumil Trivedi, vice-president, Asit Mehta Securities.

The benchmark Bombay Stock Exchange 30-share sensitive index (Sensex) gained marginally by 6.26 points at 2956.84 for the week compared to 2950.58 in the previous week. On the National Stock Exchange (NSE), the S&P CNX Nifty Index moved up by 5.50 points at 956.95 compared to 951.45.

"The current move of the Sensex is a part of the longer-term bottoming out process,'' observed Salim Dawoodani, vice-president (equity research), Darashaw & Co. Last month, the Sensex managed to close above the crucial level of 2810, despite coming tantalisingly close to it. Since November 1993, it has not registered a monthly close below this level. Hence, a decisive breach of this cushion would have rendered the Sensex weak. The pivotals, led by Reliance, rallied brilliantly enabling the Sensex re-coil from the low of 2828.

The fact that volumes were huge during the rally indicates a sea change in the sentiment that had been depressed lately. "This also suggests that the next decline will possibly see considerable buying support, at least in scrips such as Reliance, by all those who feel they missed the bus the first time. Even those who had entered at around the bottom will look forward to consolidate their holding at lower levels. Technically, major resistance for this scrip is pegged at Rs. 275. The all-important 200-day Simple Moving Average is placed at this level. If the scrip manages to clear this hurdle conclusively and stay above it, then it can register a sustainable upmove in the coming months. On the other hand, supports for the scrip are pegged at various levels between Rs. 250 and Rs. 238,'' said Mr. Dawoodani.

Apart from Reliance, tech majors ably supported the upmove in the Sensex. In fact, scrips such as Infosys and Satyam have shown strength. According to Mr. Dawoodani, "if Infosys manages to stay above Rs. 3,600 and Satyam above Rs. 223 after the corrective decline, both these scrips are likely to witness a significant upmove in the next few months. On the other hand, if the respective cushions are breached, then a further downside is not ruled out."

The two fast moving consumer goods (FMCG) majors namely, Hindustan Lever and ITC are still not out of the bear clutches. In the case of Hindustan Lever, a re-test of the recent low of Rs. 152 is still a possibility. In such a scenario, a drop to the level of Rs. 144 is likely . If ITC manages to sustain above Rs. 590, then it is likely to ricochet sharply. If it fails, then a further drop of ten percent is possible.

Technically, for Sensex, a top higher than 3038 is required followed by a bottom higher than 2828. Till the time the Sensex does not register a sequence of higher peaks and higher troughs, all the rallies are inferred as corrective or reaction rallies.

The Sensex is now trudging between the psychological hurdle of 3000 and the key level of 2930. A break below 2930 can dampen the spirits, at least temporarily, and the Sensex can slide back towards the recent low of 2828. Conversely, a decisive conquer of 3000 can see it jump to re-test the crucial barrier of 3038.

To sum it, Mr. Dawoodani said, one can certainly say that the mood is cautiously bullish. As the risk-reward ratio is getting attractive, long-term investors should focus on buying. Distress selling should be avoided at all costs. Small investors should instead concentrate on capitalising on declines for accumulating quality scrips that are available at pathetic levels.

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