The Hindu Business Line : Infosys results, ONGC to guide direction

LAST week the market was cautious and the overall movement was somewhat flat as also the volume was relatively low. The prime indices - the Sensex and the Nifty — gained 50.37 points and 12.45 points respectively. The madcap stocks performed better than the heavyweights.

Among the other indices, the best of the lot was NSE Midcap Index, which closed roughly 4 per cent away from its highest scaled peak. The S&P CNX 500 added on 18 points last week.

This week, for the key indices to move ahead, increased volume support appears to be a precondition.

According to weekly charts, the price patterns suggest resumption of a medium-to-long term upward movement. However, the volume and sentiment indicators have not gathered enough steam to move forward sans throttle.

The short-term moving averages also painted a bullish picture (for example, the 20-day exponential moving average crossed the 40 DEMA). Technically speaking, the Sensex has nearest support at around 5680-5700 points level followed by another at around 5550-5570 points and the resistances are waiting around 5920 points and 6050 points respectively.

The mid-cap stocks are likely to do better than the heavyweights. But, the volume would be the key element in the price movements.

Interestingly, the net investments by the FIIs were not only positive but decent also in all the four trading days last week. The domestic mutual funds continued to be net sellers.

Three developments — the ONGC stock's entry into the Nifty with highest weight, Infosys results on April 13 and negative turn of events in Iraq for the US army — are likely to influence market sentiment this week.

In anticipation of the counter's place in the Nifty from Monday onwards, the ONGC stock saw spirited buying last week. For the first few days, the stock may enjoy an additional glory on the count of its new status.

The anticipated moderate-to-highly conservative results (also guidance for the 2004-05) have already been discounted. The slow and gradual waning of outsourcing outcry in the US have made some long-term investors confident about the status quo regarding the destination India for outsourcing in the medium-term. As nobody is expecting a dramatically scaled-up guidance, demurs on the contrary by Infosys may ready the market for new valuations for the sector as a whole.

On the external front, US moves on the Iraq and crude price movement (not necessarily inter-linked) are likely to sway market sentiment in the US. A reflection of that on the domestic market may not be altogether surprising.

As election time draws near, the market would prefer to contain exuberance within a reasonable limit. However, some sectors may cheer up relatively more than the rest. The power sector stocks may find new takers as electoral promise from the ruling alliance suggested enhancement in investments in the next couple of years. The sugar counters are likely to move up on the expectation of a better realisation as the crop reports indicated lower production.

No sector inherently looks weak at this point in time. Among the mid-cap stocks, the biotech counters witnessed a flurry of activity and renewal of interest following Biocon's listing. This may, however, be short-lived. The fundamental eventually would decide the valuations instead of the sentiment.

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