WE HAVE MOVED

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http://groups.google.com/group/theindiastreet/web/Nifty_Intra_051007.jpg

Enthusiasm and volatility rule the market; investors cautioned!

According to media reports, the Union Finance Minister Palaniappan Chidambaram has cautioned retail investors at this stage. The BSE Sensex just fell short of 18000 mark as the enthusiasm among the market participants grew more.

Mr. Chidambaram was quoted as saying, “I doubt if retail investors are entering the market at this level. I would advise them caution. Apparently there is lot of interest from foreign institutional investors (in Indian shares). Why should we not welcome it? ”

The foreign institutional investors have huge amount of funds that can be invested at possible market tops as well as bottoms. They can hold the stocks for longer periods of time. The average retail investor though, has a very limited amount of money (usually hard earned) to invest in stocks. When the stock market begins to fall, retail investors buy at dips; but still market may go down. They realize that they could be trapped and this results in more panic selling.

Based on technical scenario, we had mentioned in our weekly review dated September 22, 2007 and monthly review dated September 29, 2007 that the market has entered an uncertain zone and investors need to be cautious.

The following table shows the points gained/lost by both Sensex and Nifty during the week.

Date	Nifty	Sensex
01-Oct-07	47.60	37.52
03-Oct-07	141.85	518.42
04-Oct-07	-2.15	-69.90
05-Oct-07	-22.80	-3.78

On Friday, Sensex touched a high of 17979 while the Nifty registered a high of 5261 on Wednesday.

The following table shows the Foreign Institutional Investors activity in capital market segment at both BSE and NSE for the week. These are provisional figures (in Rs. Crores) released by the stock exchanges.

Date	Net purchase/sale
01-Oct-07	2196.00
03-Oct-07	3161.50
04-Oct-07	575.00
05-Oct-07	948.06

On October 5, FII’s trading activity in derivative (Futures & Options) market is given below.

Contracts	Net purchase/sale
INDEX FUTURES	675.33
INDEX OPTIONS	17.02
STOCK FUTURES	-667.33
STOCK OPTIONS	-14.61

This gives us some idea of what they do. In the capital market segment they were net buyers; in stock futures they were net sellers. They have the flexibility to be long in one segment and short in the other. They can sell the stocks bought at lower levels; they can cover up their current short positions when market declines.

Over the last couple of days, volatility has been on the higher side. On Thursday Nifty opened at 5212. After hitting a high of 5233, it touched a low of 5126 and closed at 5209. Once again a ‘doji’ body was formed, indicating indecision. The long lower shadow indicates that there was strong buying at lower levels. The intraday chart of Nifty on October 5 is shown above. On Friday there was a long upper shadow, suggesting profit booking at higher levels.

Let us now discuss the daily chart of TATASPONGE.

http://groups.google.com/group/theindiastreet/web/TATASPONGE_D_051007.jpg

We discussed about this stock in my previous article, “5 Reasons to Remain Bullish on India Stocks in the Short Term”. We can note the “Hanging Man” candlestick formations at the top of the uptrend. This signifies selling at higher levels. As a result the stock fell slightly. But, there was “bullish piercing line” pattern formation after the hanging man. A confirmation, with a green candle and higher close have appeared on the second day. The stock hit the 20% upper freeze in early trade on Friday; but due to some profit booking it closed slightly at 232.60, gaining 19.19%.

We may consider this as overenthusiastic since the stock has retraced more than 100% from a low of 90.15 in March 2007. It is not however, abnormal in a strong bull market. But this can be a trap to those who buy at higher levels. Also, if the piercing line pattern formation occurs after a steady downtrend it is more meaningful and reliable. At the market tops and in sideways movement it may not make much sense.

http://groups.google.com/group/theindiastreet/web/Nifty_D_051007.jpg

In the daily chart shown above, Nifty still has not shown any sign of reversal. So is the case with weekly charts. As I have mentioned in my previous articles, a confirmation is necessary in order to judge the trend reversal. The slow stochastics indicator has been moving above 80 over the last one month; though it is normal to be in overbought zones for a period of time, a correction is surely missing. Declines are healthy in a trending bull market. In the absence of such corrections/declines, the upmove becomes questionable.

It is suggested once again that the small and retail investors may approach the market with a cautious note at these levels. This however, does not mean that they should not trade. There will be few opportunities even in such uncertain markets. However, strict stop losses should be applied by day traders and short term investors.

Advance / Decline Ratio:

Date	Adv.	Dec.	Unch.
01-Oct-07	678	457	23
03-Oct-07	396	744	17
04-Oct-07	418	707	30
05-Oct-07	339	789	24

Interestingly, Nifty gained 141.85 points or 2.80% on October 3 but 64% of the stocks declined.

Top Gainers / Losers among Index stocks:

Scrip	% Gain	Scrip	% Loss
REL	20.12	ITC	5.82
SUZLON	13.70	SBIN	4.61
TATAPOWER	10.52	MTNL	3.98
LT	10.03	NATIONALUM	3.74
RCOM	10.01	HEROHONDA	3.49

Top Gainers / Losers in overall market:

Scrip	% Gain	Scrip	% Loss
TORNTPOWER	38.91	NIITLTD	18.19
NBVENTURES	33.85	MIRZAINT	15.11
TATASPONGE	33.41	SABERORGAN	14.29
GREAVESCOT	27.14	IFCI	13.62
INDOWIND	26.88	ZENITHINFO	13.02

Sundaramurthy Vadivelu

Suggested Reading

Saturday, September 22, 2007

Weekly Review of the India Stock Market

Indices record new highs; but it’s time to be cautious

Please click on the above link to view the disclosure document before reading this article. The contents may not be reproduced in any form without obtaining prior permission from the publisher.

http://groups.google.com/group/theindiastreet/web/Nifty_D_220907.jpg

On September 18, the US Fed Reserve cut the key interest rate by half percentage point and many Asian markets were reacting sharply to this news.

Has the Indian stock market over reacted to Fed rate cut news? It appears to be so. The following table shows the points/percentage change in various stock exchanges across Asia. It can be seen that Sensex and Hang Seng (Hong Kong) were the maximum beneficiaries. The news made did not make much impact on Taiwan and China’s stock markets.

Exchange/Index	Points	% Change
New York (DJIA)	335.97	2.51
Mumbai (Sensex)	653.63	4.17
Hong Kong (Hang Seng)	977.79	3.98
Osaka (Nikkei)	579.74	3.67
Seoul Composite	64.04	3.48
Singapore (Straight Times)	116.61	3.35
Jakarta Composite	73.48	3.28
Kuala Lampur Composite	19.83	1.55
Karachi 100	174.94	1.35
Taiwan Weighted	26.47	0.30
Colombo ASPI	(18.29)	(0.01)
Shanghai Composite	(29.94)	(0.55)

AOL India reported that some caution is warranted in the near term. It read:

Sounding a similar cautious note, Arun Kejriwal of Kejriwal Research and Investment Services (KRIS) said, "It is a milestone indeed, but considering the way the market has gained the last 600 to 800 points, it makes us believe that something is wrong somewhere."

In May 2006, US Fed Reserve increased the interest rates for the sixteenth consecutive time by 0.25% to 5.25%. On this occasion, the Sensex lost nearly 31% in just five weeks time. But it went on to break its previous high of 12671 and go past even 16000.

Let us now analyze the daily charts of Nifty and Sensex and try to understand why a cautious approach is needed. Following table shows the points gained/ lost by Nifty and Sensex during the week.

Date	Nifty	Sensex
17-Sep-07	-23.35	-99.37
18-Sep-07	51.55	164.69
19-Sep-07	186.15	653.63
20-Sep-07	15.20	25.20
21-Sep-07	90.00	216.28

The Nifty closed at 4838, gaining 319.55 points or 7.07% for the week while Sensex closed at 16564, gaining 960.43 points or 6.16%.

In the last week’s review we anticipated correction since profit booking was seen at higher levels. But we did not rule out the possibility of indices going upwards since there were no reversal patterns or signals. As expected, the week started with a corrective decline of 23.35 points. However Nifty had broken its previous resistance at 4648 and closed above it for three days in a row.

Generally, when the market lacks direction i.e. at top and bottom, some “force” or “trigger” may help in deciding further movment. In August, the markets were in overbought condition and the US Sub-prime mortgage crisis acted as a trigger for a quick fall. This time, when everyone was looking for a correction Fed rate cut news made the markets move up higher.

Whatever the reason for this movement may be, now technically the indices have breached their resistances.

In the daily chart, we can see an “ascending triangle” breakout with a triangle height of 646 points. The technical target for this breakout works to 5294.

However, ascending triangle breakouts have a tendency to fall back and test the support levels. This can be seen from the weekly chart shown below.

http://groups.google.com/group/theindiastreet/web/Nifty_W_220907.jpg

It can be seen that Nifty, after breaking resistance has tested the support (earlier resistance) and after another upmove has fallen back to close below these levels. Going by this chart, the Nifty may very well fall below 4648 (see daily chart) and that possibility certainly exists. But that decline should only be used as an opportunity to enter Nifty futures.

The last time that Nifty gained more than 7% in a week was 6 years ago, during the week ending April 20, 2001.

http://groups.google.com/group/theindiastreet/web/Sensex_D_220907.jpg

In the daily chart of Sensex too, the bullish continuation pattern, ascending triangle breakout has occurred. The triangle height is 2089 and technical target for this breakout is 17958. Watch the huge upward gap on September 19. This long white candle was followed by a doji, indicating indecision among traders about further movement. However, a white (green) candle and positive close has nullified the uncertainty.

Forecast for the next week:

There is a stock market saying: “News based rally seldom survives.” Technically the market has already entered overbought zones; As discussed in the weekly chart, ascending triangles are likely to test their support levels; Nifty has made a high of 4856 (it touched a low of 4002 last month) and gained about 21.3% without any significant correction. Let us now wait for a confirmation next week about the reversal. As I have mentioned in my earlier articles, a confirmation is important while deciding about future price movements.

Abnormal movers during the week:

On September 19, even as indices were soaring to new highs, sugar stocks witnessed heavy buying following an announcement that Government may allow sugar mills to produce ethanol and sell directly. Sree Renuka Sugars gained 24.16% during a single trading session.

On September 21, Reliance Natural Resources (RNRL) gained 35.30% and 209 million shares got traded. The market speculated that the company is getting into gas distribution. Technically it broke its resistance at 41.65 during July 2007.

Advance / Decline Ratio:

Date	Adv.	Dec.	Unch.
17-Sep-07	539	583	28
18-Sep-07	782	346	25
19-Sep-07	679	453	25
20-Sep-07	453	667	32
21-Sep-07	467	668	21

Inspite of Nifty gaining 90 points on Friday, 57.8% of stocks ended up as losers.

Top Gainers / Losers among Index stocks:

Scrip	% Gain	Scrip	% Loss
RPL	18.55	SATYAMCOMP	2.73
REL	14.33	CIPLA	2.70
GAIL	13.37	WIPRO	2.57
SAIL	12.44	SUNPHARMA	2.40
RELIANCE	12.08	RANBAXY	2.14

Top Gainers / Losers in overall market:

Scrip	% Gain	Scrip	% Loss
STCINDIA	75.08	SUBEX	17.23
RIIL	74.21	TORNTPHARM	10.62
RNRL	51.43	AFTEK	10.07
WALCHANNAG	51.09	KPIT	10.04
UNIENTER	48.19	LOTTEINDIA	9.16

Sundaramurthy Vadivelu

Suggested Reading

Friday, September 14, 2007

Weekly Review of India Stock Market

Nifty turns volatile; clear picture to emerge soon!

Please click on the above link to view the disclosure document before reading this article. The contents may not be reproduced in any form without obtaining prior permission from the publisher.

http://groups.google.com/group/theindiastreet/web/Nifty_Daily_140907.jpg

Over the last 6 trading sessions, the Nifty witnessed lot of volatility (4 days on the upper side due to profit booking and 1 day on the lower side due to pull back) and confusion prevailed as to what the next move could be.

In the last week’s review we discussed about the formation of a bullish engulfing pattern at the top of an uptrend. I had mentioned that the Japanese view it as “double lovers’ suicide’ and profit booking may start. This was exactly the case, as shown in the daily chart below.

While the bullish engulfing pattern formed at support levels in a downtrend is considered as a reversal sign, the one formed at the top of an uptrend is an indication that the market may witness profit booking or a possible downtrend may start.

In the above chart, last Friday, just after the formation of bullish engulfing pattern, a red candle with a long upper shadow appeared. The same was the case this Tuesday, Wednesday and Friday, indicating the sessions encountered sell off. On Monday, the formation of long lower shadow means that the attempt by the bears to push the index down was negated by the bulls. On Thursday Nifty gained 32.10 points, the only session bulls were in total control without much volatility either on upper or lower side.

The following table gives the sessionwise gain/loss for Nifty.

Date	Points Gained	% Gain / Loss
10-Sep-07	-1.65	-0.04
11-Sep-07	-10.80	-0.24
12-Sep-07	-0.20	0.00
13-Sep-07	32.10	0.71
14-Sep-07	-10.95	-0.24

Nifty gained 8.50 points (0.19%) for the week. However, it still did not close above 4530, an important resistance level. It just missed it by 1 point on Thursday when it closed at 4529.

http://groups.google.com/group/theindiastreet/web/Nifty_Intra_140907.jpg

The intraday chart of Nifty (Source: NSE web site, www.nseindia.com) shows the profit booking that started after the middle of the trading session. It also tells us about the inability of the bulls to maintain the index at higher levels right through the day.

However, there are no reversal signs yet in both weekly and monthly charts of Nifty and we maintain our bullish view of medium and long term.

In the Nifty futures contract though, there is a bullish engulfing pattern at the top of the uptrend; but the volatility could not be found. Also, no reversal sign can be seen in this chart too.

http://groups.google.com/group/theindiastreet/web/NF_Sep_140907.jpg

Forecast for next week:

Last week I had mentioned that we got a clue but no confirmation. Now that the clue has been proved correct, we should expect a reversal signal and correction this week. This correction, when happens, will be good for the index. It is worth mentioning here that, after the last month’s correction, Nifty has retraced about 90% from its low at 4002.

Is there any possibility that index may breakout on the upper side without getting corrected? Though one may not rule out this straightaway, the chances are negligible, as seen from the volatility and profit booking at higher levels.

Advance / Decline Ratio:

Date	Adv.	Dec.	Unch.
10-Sep-07	612	515	26
11-Sep-07	492	630	29
12-Sep-07	589	537	27
13-Sep-07	653	474	24
14-Sep-07	314	824	15

Top Gainers / Losers among Index stocks:

Scrip	% Gain	Scrip	% Loss
SUZLON	7.01	HCLTECH	9.71
RPL	6.47	WIPRO	5.85
STER	5.40	TCS	5.00
DABUR	5.06	CIPLA	4.71
IPCL	4.78	SATYAMCOMP	4.24

Top Gainers / Losers in overall market:

Scrip	% Gain	Scrip	% Loss
TIDEWATER	55.90	DCHL	19.87
MARKSANS	40.13	DECOLIGHT	16.71
NAUKRI	38.48	SELMCL	15.05
AFTEK	34.94	ROLTA	13.73
NOVAPETRO	33.24	SUBEX	12.92

Sundaramurthy Vadivelu

Suggested Reading

Saturday, September 8, 2007

Weekly Review of India Stock Market

Indices move upwards; corrective decline likely

Please click on the above link to view the disclosure document before reading this article. The contents may not be reproduced in any form without obtaining prior permission from the publisher.

http://groups.google.com/group/theindiastreet/web/Nifty_Daily_070907.jpg

First, the GOOD news:

On Friday, the National Stock Exchange revised the price bands (also known as the operating range) for 214 stocks. Out of these, price bands were increased for 209 stocks. For 90 stocks, 10% price band is applicable instead of current 5%; For 10 stocks, 20% price band will come into existence replacing 5%; The remaining 109 stocks’ price band has been increased to 20% from 10%. This means that the liquidity for these stocks will increase. Surely a good news for the market.

Next, the not so good news:

The Nifty has failed to close above 4530, an important resistance level.

In last month’s review, I had mentioned that the index needs to form a higher high and higher low to resume uptrend for achieving the next target of 4935.

Date	Points Gained	% Gain
03-Sep-07	10.75	0.24
04-Sep-07	4.50	0.10
05-Sep-07	-3.40	-0.08
06-Sep-07	42.75	0.96
07-Sep-07	-9.10	-0.20

Except on Thursday, the Nifty gained or lost very marginally. The overall gain during the week for Nifty is 45.50 points or 1.02%.

It can be seen from the daily chart that as resistance level is approached, the volatility increases. Once the Nifty went past 4530, a minor sell off occurred on Friday. This has resulted in a long upper shadow. A ‘doji’ was formed on Tuesday, indicating that market is not sure which way to go.

As of now, there are no significant reversal signs in the daily chart. A “bullish engulfing” pattern has been formed on Wednesday and Thursday. This formation, when occurs near support levels at the end of a downtrend is a reversal sign (it of course needs a confirmation on the third day). Whereas, if it is formed on the top of an uptrend, it is referred to as “double lovers’ suicide’ by the Japanese, meaning more people will jump into the rally thinking it would continue further. But profit booking may start, keeping all those who entered the stock (near the top of the trend) at bay.

Forecast for the next week:

Now we have only a clue; there is no confirmation. But on Friday, the long upper shadow indicates some sell off. So, a corrective decline next week cannot be ruled out. In such a case, one has to watch out for 4340 and 4211 which are 38.2% and 61.8% retracements in daily chart. Since Nifty is on first wave, a new support level should occur as trading goes on.

Nifty future traders may enter long positions only after confirmation of the trend reversal. Short sellers on the other hand, may see some profit initially, but in bull markets they are the ones who suffer most.

Nifty continues to be bullish in medium term and long term charts.

Sensex:

http://groups.google.com/group/theindiastreet/web/Sensex_Daily_070907.jpg

In the sensex also, a “bullish engulfing” pattern has been formed on Wednesday and Thursday. A bullish “three inside up” pattern has been formed at the bottom of the downtrend (compare this with the bullish “three outside up” pattern in Nifty). The sensex too, is poised to witness a correction. The support levels for the sensex are 14979 and 14521.

The weekly charts of Nifty and Sensex are given below. Note the formation of candlestick patterns in both the charts.

http://groups.google.com/group/theindiastreet/web/Nifty_Sensex_W_070907.jpg

In case of Sensex, a bullish “Homing Pigeon” pattern formation occurred while the Nifty encountered a bullish “Three inside up” formation. It is quite possible to analyze both indices simultaneously, but for the sake of simplicity it is good enough to analyze one.

The India Street selected some stocks as short term picks. The following table shows their status.

Scrip	Close 29-Aug	Highest Close	% Gain
BOMDYEING	542.45	611.10	12.66
GTLINFRA	34.30	36.85	7.43
KOTAKBANK	699.35	732.50	4.74
SCI	178.85	202.00	12.94
SUNILHITEC	204.70	250.75	22.50

Our medium term pick XL Telecom Limited closed at 180.65 (on June 29 its close price was 134.25) gaining 34.6% in just over two months time.

Advance / Decline Ratio:

Date	Adv.	Dec.	Unch.
03-Sep-07	849	276	25
04-Sep-07	699	422	30
05-Sep-07	557	572	21
06-Sep-07	712	405	31
07-Sep-07	502	636	15

Top Gainers / Losers among Index stocks:

Scrip	% Gain	Scrip	% Loss
REL	9.11	BHARTIARTL	3.61
SUNPHARMA	8.76	GLAXO	3.01
CIPLA	8.34	BPCL	2.20
GRASIM	7.87	ZEEL	1.18
HDFC	7.56	ONGC	1.03

Top Gainers / Losers in overall market:

Scrip	% Gain	Scrip	% Loss
AMBICAAGAR	46.64	PATNI	12.01
DECOLIGHT	45.19	JAYAGROGN	10.63
AKSHOPTFBR	39.78	USHAMART	7.09
SAREGAMA	34.70	TELEDATAIN	7.02
SAMTEL	34.63	WELGUJ	6.93

Sundaramurthy Vadivelu

Suggested Reading

Friday, August 24, 2007

India Stock Market – Weekly Review Indices appear to have bottomed out!

By Sundaramurthy Vadivelu