Tiring Bulls and Fearing Bears

Last week, there was a pause in the Bull Run that had continued for a record thirteen weeks. Still, Sensex managed to close the week with marginal gains. Nifty closed with a marginal loss. However, small and midcap stocks faced a big sell-off probably due to profit booking. Even though, Bulls are quite tired after running for quite some time without break, Bears are still uncertain of taking full control of the market.

Markets opened the last week with losses as there was a good amount of profit. Sensex faced a strong resistance around 15500 levels and the Nifty at around 4600 levels. It was widely expected at that time that the Bears would take control thereafter. However, Prime Minister’s statement in the Parliament that the country has a potential for 9% growth and the stunning profit made by Satyam changed the moods of market. Bears were marauded once again. Still, rising crude prices and indecisive global markets checked a repetition of previous weeks’ big show and in fact, small and midcap stocks could not recover their early losses like their largecap peers.

WPI Headline Inflation hit record low levels. Finance Minister impressing upon the PSU Banks to cut their lending rates hit the PSU banks hard. Positive IIP numbers cheered the markets. However, it triggered profit booking by the traders.

US data was a mixed one. There are fears of an inflationary environment choking the growth prospects. Rise in crude prices is negative news for the global equity markets. There are market speculations of rate hike by Federal Reserve sooner than later to moderate the inflationary expectations.

Sensex faces a strong resistance at around 15600 levels and Nifty at 4700 levels. Sensex has a good support at 14500 and 13500 points.

Even though India is a good long term story, the largecap indices appear to be fully priced-in in the short run. Market seems to be in an overbought position. At the same time, tireless FII flows may change every calculation.

Wishing a happy week ahead.