| Three very bullish sessions were sandwiched in-between two corrections. The Nifty hit highs of 5549 before easing off to 5428 points for a week-on-week gain of 4.67 per cent. |
| The Defty was up 4.89 per cent as the rupee closed at 39.33 versus USD. The Sensex blinked only after it had hit a high of 18845 and closed up 3.63 per cent at 18419 points. The Junior was up 2.6 per cent at just above 10020. |
| While volumes were excellent, breadth was less bullish. The BSE 500 was up only 3.03 per cent and smaller stocks less fancied. The Advances to Declines ratio was marginally positive for the week and very negative on Friday. The reason was clear. |
| The FIIs have poured money into the top 200-odd stocks. Indian funds have been net sellers for 15 sessions. Operator interest is concentrated on big stocks and retail investors have stayed out or booked profits. |
| Outlook: The correction could continue. Key support levels are Nifty 5350 (Sensex 18250) and 5250 (Sensex 17950). The market looked distinctly nervous by Friday evening. The depth of correction will, to a great extent, depend on FII attitude. |
| Rationale: In the past 7 weeks since August 24, the Nifty has climbed from 4100 levels without significant correction. That intermediate trend could last another 4-5 weeks in theory but every momentum indicator is overbought and breadth was negative on Friday. Also, volumes rose while prices fell, indicating that supply increased as traders fought to book profits. |
| Counter-view: The rally has come on the back of FII purchases driven by rupee strength coupled to an US Fed rate cut. Through October, Indian funds have been net sellers. If the FIIs stay positive, they have deep enough pockets to force the markets up. If they change attitude, there could be a significant correction. |
| Bulls & Bears: Breadth was exceedingly negative through Friday |
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