Difficult to see Sensex moving up unless FII investments pour in
K Seshadri
The Sensex has crossed the 3711 barrier, which it had developed over four days uptill Thursday last week. On Friday, the market posted a high of 3739 points and closed at 3720. This breakthrough is welcome. For otherwise the Sensex faced the risk of breaking downwards.It is too early to say if the breakthrough was achieved due to the New Year euphoria, which has afflicted many markets across the globe. The seven-day exponential moving average for the Sensex is at 3625, while the market closed at 3720. Therefore you should consider the upmove to be in tact. Nevertheless, the momentum has slowed down. The stock (stochaistic 7,5,5) indicator continues to maintain the sell signal, which came on during the week. The long-term RSI and KST (know sure thing) indicators though advice you to hold on. The Sensex's position is indeed weak if you look over the scrips that constitute the index. ACC, Bhel, Colgate, IDBI, Bajaj Auto, Glaxo, Grasim, HPCL, Indian Hotels, Larsen & Toubro have clearly weakened. They are
unable to hold their position and are slipping. In fact, the four-day phenomenon of not being able to breach the upper barrier witnessed by the Sensex is seen clearly in most scrips. While the Sensex has managed to break the barrier (thanks to a strident gain in SAIL and support from HLL and Hindalco), profit-taking has been nibbling at the top. It is only IPCL and BSES that have shown strength. Even Reliance and ITC are suffering from fatigue, while SBI manages to inch up the slope. MTNL has its own obvious strength while Mahindra & Mahindra, Gujarat Ambuja and ICICI have a firm undertone. With such a picture, it is difficult to see the Sensex moving up unless FII investment starts pouring in substantially. The real risk is that the inability of the scrips to move up further can end up in triggering the reversal of trend for the Sensex. But due to sentiments about the developments in the political situation, the Sensex may not go down much. Ultimately, the bourses may decide to take one more week to
consolidate, before they can move up further. That should give good opportunity for long term investors to make up their minds and entry levels. Bharat Earth Movers: Good buy This scrip has been establishing its bottom since November'97 at Rs 75-Rs 77 region. The bottom now appears well tested. The scrip could be attractive for long term investors. Technically when the upmove comes through, the scrip could go up to Rs 103, which would be a one-third gain. IPCL: Book profits periodically This scrip has been moving up from Rs 61. The upmove has been gradual and orderly. That indicates investment interest. The scrip has a good chance of reaching Rs 87 and thereafter Rs 97. Long term investors could start accumulating. Go slow, for you might add up on any possible reaction too. (On fundamental side the scrip's fortune will be affected by global polymer prices, dumping and anti-dumping effectiveness). While investing for long, you should ideally keep booking profits periodically, and
re-entering! SAIL: Go long The lowest price that this steel major has touched is Rs 9.25. It has also established Rs 10 as its baseline now, through a period where the stock market was checking itself out on the whole. In due course and technically the scrip can reach up to Rs 13.50, giving a good return. The scrip deserves the attention of long term investors. It may be noted that the outlook for the steel industry currently is none too bright. But, in the second half of 1998, the demand could perk. SAIL is also revamping its operations. BPL Ltd: Book profits The BPL scrip has flared to Rs 110 from Rs 100. Readers should carefully note that this scrip has entered into no delivery zone. By Wednesday this advantage would go away. That could see the scrip coming down on profit taking. At the earlier book closure between September 2 and 17, the scrip moved up from Rs 67 to Rs 87 only to come down to Rs 57. One might as well book one's profit and getting out in time. The aggressive can even
go for short selling, but then you must know your ropes. The earlier peak of Rs 260 is irrelevant, as even Videocon International was trading at Rs 240, and now at Rs 29! ITC Ltd: Testing times The ITC scrip fell through its up slope support line in November, when it fell through Rs 506 to touch Rs 476. The scrip has recovered, but could meet with resistance at Rs 651. That being the case one should be guarded on taking long positions closer to that level. The resistance needs to be tested.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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