Bears attempting a comeback

MARKET Watch

The 19,000 levels may not be easy to achieve unless the forthcoming results and strong foreign inflows lend support to the indices. The bears seem intent on striking back, atleast going by the extent to which markets shed weight on Friday.

The finance minister's admission about being worried by the rise in the markets triggered a 200 points dip in merely 20 minutes, on Friday. Statements by the Prime Minister and Sonia Gandhi ruling out early elections, and good industrial production data numbers were not enough to hold the market.

"When the market starts falling after a steep rise, views tend to change overnight. The reasoning gains ground that one could wait, so as to get stocks at better valuations", according to Indiainfoline. The rise was driven by liquidity, whereas domestic investors were booking profits at every rise.

"Medium to long term investors need not be worried. In fact the rise in the Sensex, particularly the last 2000 points journey, was driven by a handful of stocks. But when the correction happens, most mid-caps bear the brunt as retail investors press the panic button", Indiainfoline added further.

According to technical expert, Vijay Bhambwani, high implied volatility is an area of concern. Higher the volatility, more are the chances of a correction. The F&O indicators showed a 9 per cent increase in net long positions and the PCR has eased marginally as bears resorted to partial unwinding of shorts.

The market breadth suggests a selling bias. A total of 60 per cent of the weekly traded volumes were initiated on uptick days. This indicates buying on declines by stronger hands, whereas retail investors have been selling on advances.

"Whenever correction happens, it will be steep. But more foreign investors would come in at lower levels, as they have been waiting in the wings," said Paresh Gandhi, director, B M Gandhi Securities. He expects the market to be range bound for some time, but not fall below 17,500 for now.

The announcement of quarterly numbers by the likes of TCS, Reliance, Wipro, ACC and Reliance Energy will act as major triggers next week.

The Sensex closed higher by 645 points or 3.63 per cent at 18419 last week. The Nifty was up 242 points and closed at 5428. The markets failed to touch the 19000 mark as the Infosys' results and Reliance AGM belied expectations.