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Profit taking in early trades likely

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Our Web Bureau Mumbai
Following a near 1000-point surge in the last two trading sessions. The Sensex is likely to witness some profit taking in early trades this morning.

However, the bulls may note like to concede the advantage with ease as they take comfort from the Rs 1,000 crore buying of FIIs in the derivatives segment on Friday.

On an upmove, the index is likely to counter resistance around 10,045-10,090-10,140 levels. On the downside, the index may take support around 9725-9675-9625 levels.

Weekly levels - on the upside the index may test 10,700, while 9400 is a crucial support level for the index this week, below which it may again exhibit weakness.

Market Outlook - analyst - Bharat Momaya

Bharat Momaya expects Sensex to maintain both upward trend and intra-day volatility. Adding that the Sensex may hit upper circuit-breaker, reverse of lower circuit that happened on 22nd May in the coming days.

'The so called contagion effect is likely to work reverse way now and co-relation between overseas markets may no longer be followed as a guiding light.', he added.

In Momaya's opinion, the so called co-relation between Indian markets and overseas markets is completely absurd. It is hyped up beyond reasonableness. In 1999-2000 also, similar phenomenon was widely popularized. Everyone was then watching Nasdaq and Dow rather than BSE and NSE indices!!!

'If one can invest/trade for profit based on overseas indices, Indian market participants do not need any professional help!' 'This is nothing but making FOOL of Gullible Indian Investors!!

Invetsors need to be cautious of such absurdities while deciding on their investment plans. This is so particularly because stock valuations in Indian markets are not affected by market indices of foreign countries.

Core factors that now only can affect valuations of Indian companies are Corporate performance, Indian Economic scene, Monsoon, natural calamity and political situation.

Rest of the factors like Fed interest rates, Bank of Japan's bank rate are not going to affect Indian stock valuations materially. Even if some effect is seen, it will not be eternal.

Indian economy has its own plusses. I do not think Fund withdrawal caused by interest rate hikes by banking regulators abroad should affect Indian markets significantly.

Indian Equity remains very attractive avenue for getting returns. So new funds will eventually replace the space caused by withdrawal by FII hot money.

The Sensex PE Ratio at about 17.9 times is still within risk-free zone. Corporate tax payments in June, 2006, are expected to be higher and point to a positive expectation about Q1 results. FII trend remained positive in the current month. Huge portfolio churnings must have taken place during the first fortnight of June.

Sensex should seek target of 13,400 in medium term.

 

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First Published: Jun 19 2006 | 9:14 AM IST

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