The Hindu Business Line : Benchmarks may move up as undertone turns bullish

THE three-week old correction appears to have ended on the domestic stock market courtesy voluntary reduction in domestic steel prices and easing of global oil prices.

Though, the price reduction was negative for the steel stocks, for the counters of several other steel consuming industries, it was positive.

The overall impact of easing of price pressure in key industrial inputs appears to be positive on the market sentiment. As a result, once again all the major indices ended the last week with gains. The rise was, however, led by the mid-cap stocks. The small-cap stocks also joined the bandwagon.

The key indices, for obvious reasons, did not quite reflect the market mood in favour of mid-cap stocks. The BSE Sensex appreciated by 52.35 points during the week. The S&P CNX Nifty clocked a gain of 18.65 points. In terms of percentage, they gained by a little over one per cent week-on-week, while the S&P CNX 500 index put on 24.65 points more to the score and gained by 1.8 per cent.

The BSE Consumer Durables and the BSE Capital Goods index outperformed the other indices and posted gains of 7.56 per cent and 3.92 per cent respectively. The advance-decline ratio last week was positive. For every three shares that fell, there were four stocks that appreciated.

This week, market is likely to move up as inflationary pressure is expected to ease for most of the industries. However, the market would remain sensitive to political development and vulnerable to any northward move in the crude oil prices. Withdrawal of truckers' strike is likely to boost sentiment.

The market needs further confirmation for end of negative developments before it turns really bullish. A lot of funds are still awaiting clearer signals for consolidation in the short-term. This was evident in the market pricing of the TCS stock. Though it quoted last week at a substantial premium to the issue price, but did not attain the market expectation level of an initial listing price of Rs 1,200.

According to charts, the medium-term trend for the market is still up. The short-term trend, which was down till the beginning of last week, has given signals of an upward bias. The Sensex is expected to face strong resistance at around 5270 points level. The next resistance is at around 5325 points. The technical view suggests that for the Sensex and the Nifty, weekly closing below 5064 points and 1590 points respectively may trigger a medium-term down trend. The day-trading and the liquidity flow this week may be determined by these technical pointers.

The volume signals last week clearly indicated small- and mid-cap stocks were in the buzz. The large-cap stocks remained within a range, which can be described as relatively moderate-to-low.

Many inactive stocks are moving on money flow, but fundamentals of these counters do not support such interest. As the current volume behaviour reflects a shift of interest towards the small caps in general, discretion among the retail investors would guide the trading in the penny stocks in the next few weeks.

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