The Sensex opened on a positive note at 3011, gaining 8 points over the previous close. On the upside, it could gain just 5 points to close at 3016, which was modestly higher by 8 points over the previous high.

But the market crashed in the last one hour, when the Sensex moved down swiftly to 2965. According to market sources, there were rumours about raids on Reliance Industries. Brokers had been getting queries from upcountry about these rumours. While market was aware of these rumours right through the day, it is a bit difficult to explain why the market should crash so badly in the closing hour.

But take a close look. And you see that it is only scrips which had made a swift gain up, that have reacted, especially pharmastocks. HLL which went down, came back in the closing minutes, partly. Tisco failed to react. Others like Gujarat Ambuja could not close on their upper reaches, yet they did not go down for the day. Overall I get the impression, that cautious operators have not only squared off their positions in counters like ITC, but may have even resorted to short selling. If this is the case, then at the kerb, Reliance Industries is reported to be steady at the closing level, while there was weakness in ITC. However market sources except a recovery tomorrow.

Coming back to technicals, the daily stochastic indicator for the Sensex has moved down from 80 to 32 in just one day. This is most unusual. Such a drop usually takes 3-4 sessions. This also makes recovery a strong possibility on Friday. And if bears had had a go at short selling, covering of such shorts would become necessary on Friday, further reinforcing the logic for recovery. For sharp traders there may be opportunities tomorrow to make entries in oversoldscrips. As short sellers cover their position for week end, there is scope for making gains. You would do well to update yourself on news and rumourwise the actual state of affairs before trading begins.

Then exploit that at trade.