Market sentiment appears weak

Wednesday, August 13 1997

Market sentiment appears weak

K Seshadri

August 12: The technical picture identified in this column yesterday proved to be true. We had argued that Monday's price rise could prove to be deceptive, and short selling was indicated. The market displayed overall weakness and scrips across a wide front lost due to short selling. The Sensex opened at 4497, some 16 points above the previous close. The market posted an intra-day high of 4504, higher than the previous high of 4483. However, on the low side, it slipped to 4393, which was 31 points lower than the previous low. The close at 4425, was a clear loss of 56 points over the previous closing.

Even though the drop in values could very well be due to closing of the NSE week, the fact that the market failed to recover even at the end of the day should cause some concern.

If the fall persists, one should not be surprised if the Sensex slips to 4377. The market sentiment appears to have turned quite weak, judging by the wide-spread fall in values.

Sentiment apart, the market can be said to have touched the bottom technically only after it sheds another 50-70 points. It is difficult to predict for the next session if the operator's sentiment is bad enough to wait for this further Sensex shedding. Or would they step in to buy, considering that the technical downside has been exhausted already to around 70 per cent of its potential. Action wise, you may continue to short sell on the top side.

To play safe, add up a margin on topside for a false intra-day upmove. Colgate, Ranbaxy, ITC, Hindalco, IDBI, G E Shipping, and to an extent Reliance, seem ideal candidates. The other thing you can do is to take advantage of the weak market sentiment and buy.

I have indicated suggested levels, assuming a further fall. Buy ACC at Rs 1521, BHEL between Rs 438 and Rs 448, BSES between Rs 220 and Rs 227, Grasim at Rs 373, HPCL at Rs 487, ICICI at 99.50, IPCL between Rs 128 and 130, M&M at Rs 479, MTNL between Rs 283 and Rs 286 and Telco between Rs 377 and Rs 384.50. Telco could prove to be a profitable scrip to follow when the market reverses as it has more or less bottomed in recent times, having fallen from Rs 409.