Weekly Review as on 12.10.2008

Week that was…

As expected, equity market continued to plunge down during the last week also, mainly due to the worsening global situation.

Technical support of 12500 (Sensex) was broken on the first day of the week itself and then, there was a fall of around 2000 points (-16%) in just four trading sessions making it one of the worst ever week.

Cutting of CRR by 150 bps (and also Fed Rate) did not help in improving the sentiments either.

Relaxation of P-Note norms also did not help the market.

The De-coupling theory losing its sheen as the IIP data for the last month was a shock to market.

Still, the fall in inflation is a positive sign but market ignored it.

Even though, Infosys results were on the expected line, its lower guidance for the year brought the stock down before managing to recover at the end.

FIIs continued their selling spree.

Rupee broken 47 levels and fell further down to near 50 mark.


What’s ahead?

There is war like situation across the globe and the international leaders are now trying to solve the deep trouble by mutual coordination. Our government and RBI are also doing their part.

Sensex has now corrected by around 50% from its peak at 21000 levels. Next support for the Sensex is around 9800 levels. Stronger support comes around 8800 points.

Technically, the market appears to be in an oversold zone and a short covering may be possible any time in the immediate future.

At the same time, there has been so much of fall, by which, the back of the market has already been firmly broken and hence immediate recovery to the earlier high levels appears to be near impossible.

Also, even in case of a recovery, it will be a long-term process as well as a painful one.

Traders may avoid short positions, as there is a possibility of a swift recovery of at least 1000 plus points in Sensex in case of any positive clues from global markets. Long positions may be initiated however with strict stop-loss limits.

Investors are advised to exercise caution in picking stocks for long term as it is still not very clear which stock is having more FII exposure and which company is exposed to Foreign Currency risks. Investors are requested to look into Sensex or Nifty ETF schemes wherein the exposure is against a group of blue chip stocks rather than investing an individual stock in the current turbulent period of time.

Rupee may test the levels of 50. However, with the measures already initiated by the government as well as RBI with regards to easing the norms on Forex inflows, further fall may be arrested around 50 level.

There is a saying.


“The bull market ends with a euphoria and the bear market ends with a panic”