Thread: Investors turn jittery as market shows no signs of early recovery

THERE seems to be no quick-fix mechanism to pull back a market that has gone into a tailspin. Extending Monday’s losses, equity benchmarks fell to their lowest level in 2008, rattled by fears that RBI may raise interest rates to cool inflation. However, buying towards the fag end of the trading session by domestic funds and insurance companies saw the market recoup some losses. “Though there was some buying towards the end of the day, the market is still in a nervous mode. Unlike in previous falls, FIIs are not short covering their positions this time round. Volumes are dropping by the day and there are no leveraged positions anymore. There is absolute lack of investor interest in current market,” said Ajmera Associates director Vikram Bhatt.
According to market talk, a band of operators was seen dumping benchmark heavyweights — HDFC, ICICI, ONGC and Infosys — and short covering Reliance Industries shares in large numbers.
The 30-share Sensex ended 176.8 points or 1% lower at 14,889.25 while the 50-share Nifty closed 51 points or 1.1% lower at 4,449.8 on Tuesday. The post-noon session witnessed the Sensex trading 421 points lower at 14,645.31, falling below this year’s previous low of 14,677.24 reached on March 18. Of 2,699 shares traded on BSE, 964 scrips advanced, 1,667 declined and 68 remained unchanged. Shares worth Rs 68,000 crore changed hands on the bourses on Tuesday. FIIs net sold shares worth Rs 910 crore. “The recent surge in crude prices has not been factored in the inflation figures released last week. Taking this into account, inflation could be more than 8% this week. This will force the central bank to look at another round of interest rate hikes, which in turn, will further destabilise the market,” Mr Bhatt added.
Yet, SBICap Securities’ head of institutional sales Jignesh Desai has a different view and maintains that concerns on inflation apart, the market is likely to consolidate in and around current levels. “We expect a small correction towards the last trading days of the week, but no big drops thereafter. We could see some rally next week as the market is expecting a series of positive policy announcement and relief packages for sectors like infrastructure and real estate,” Mr Desai added.
A look at the technicals reveals that the Nifty has attempted a rally off the lower boundary of the triangle pattern that has developed since the January lows. “Our preferred view for this market is a retest of the August 2007 lows, around the 4,000 mark. A break below 4,448-4,500 would support this view that a decline towards the August-2007 low was underway. We would be tempted to bargain hunt in the 4,200-4,000 range,” a recent CLSA report said.
Elsewhere in Asia, markets fell the most in three months as widening credit-market losses and the prospect of higher borrowing costs fanned concern earnings will decline. Hang Seng, Nikkei, Strait Times and Seoul Compo ended down 1.1% and 4.2%.
Shailesh Menon Charts offer no hope for bulls
GAME Generally, the 200 DMA (Day Moving Average) is seen as the most important long-term trend indicator of a stock or an index. While life above it is seen as bullish and the 200 DMA as a support, life below it is considered bearish and the 200 DMA as bearish. As is evident in the chart, after breaking above it in mid-2003, the Nifty had consistently traded above it. On the few occasions, the index corrected sharply, the 200 DMA acted as a strong support. But this time, the 200 DMA has been convincingly breached and to worsen matters for the bulls, it has started acting as a resistance to recovery efforts. Compare this with the meltdown that started in January 2000 and the similarities are striking.
SET Although not as popular as their daily counterparts, weekly charts often help in identifying long-term trends. When a smaller moving average cuts a larger moving average from top, it is generally seen as bearish and vice versa. In 2000, the correction started in January but the 20 WMA (Weekly Moving Average) cut the 50 WMA from the top only in the second half of the year. And the result was a prolonged 3-year bear market. The reverse happened in mid-2003, when the 20 WMA cut the 50 WMA from below (after many failed attempts) and we set out on a 5-year bull market. The weakness in the last couple of weeks has meant that the 20 WMA has cut the 50 WMA from the top again ala 2000. Whether we get away with a 2004 kind of a scenario, when the 20 WMA cut the 50 WMA from the top but reversed it almost immediately, is the question worth a million dollars.
MATCH? Although rarely talked about, the 500 DMA of the Nifty gives a clearer picture. In 2000, the Nifty found strong support at its 500 DMA and bounced back quite a bit only to plunge below it almost a year later. Once below it, the 500 DMA acted as a very strong resistance, which the Nifty could never overcome until mid-2003. The Nifty plunged below its 500 DMA of 4,381.03 in intra-day trade on Tuesday but managed to close above it. This gives bulls just a glimmer of hope of a reasonable bounce back from Tuesday onwards like the one it had in 2000. However, if the Nifty slips below its 500 DMA in the coming sessions, even that hope can be considered to have been evaporated. But even if it has a decent bounce back (in 2000, the bounce back from 500 DMA was close to 30% in just 6 months), that should be seen as a chance to get out rather than get in.

Stock market shares and Expert advice go a great length in taking the right decisions!

some of the people in the market like Motilal Oswal ,Kotak and Reliance and other houses come out with their daily recommendations.What is your take on it?have you benefited from it?

Originally Posted by meera krishna

Stock market shares and Expert advice go a great length in taking the right decisions!

some of the people in the market like Motilal Oswal ,Kotak and Reliance and other houses come out with their daily recommendations.What is your take on it?have you benefited from it?

Sometimes i feel that it depends usually.What is the advice and how religiously you follow it.depends on the person.most advice really work while some fall flat on the experts face.So i would say you also have to use your brains.
So follow the experts advice but also follow your own i would say.

Originally Posted by meera krishna

Sometimes i feel that it depends usually.What is the advice and how religiously you follow it.depends on the person.most advice really work while some fall flat on the experts face.So i would say you also have to use your brains.
So follow the experts advice but also follow your own i would say.

good you gave the question and answer both!

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