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Jayanta Mallick

THANKS to the positive convergence of indices and the advance/decline ratio, the stock market finally saw a trend reversal last week amid general gloom. The Sensex moved up by around 3 per cent indicating the end of a long bear phase, particularly in the pivotals.

This week, according to a section of analysts and brokers, the signals for an approaching bull phase may be forthcoming. "The market is definitely on a rally mode, but a sharp correction is also a possibility this week", said Mr Vivek Mahajan, a technical analyst.

The consensus is that this week the indices may maintain status quo. The Sensex is foreseen to be touching 3,200 points at the most. The Nifty's peak could be 1,020 points. But the closing at the weekend may not be at their week's peaks.

Some of the experts indulging in fundamental analysis listed the news about the political environment getting murkier as also Wipro's revision of Q1 results and Dr Reddy's losing of a case in the US as negative. However, many are of the opinion that insufficient rains in some parts of the country have been overplayed to an extent.

"The negative impact of the late monsoon on the GDP growth estimates is yet to be ascertained conclusively. So far, various agencies, including the RBI, came up with 1 to 3 percentage point climbdown in the GDP figure for the year", commented an economist working with a foreign bank.

According to Mr Mahajan, the market may witness a "bottom test" through a correction and sharp sell-off. The alternative scenario could be of a gradual rise in price-line. "This is somewhat like compaction of ground before a high rise is erected", observed a BSE broker.

Mr Mathew Easow of matheweasow.com was of the opinion that the market was still in the oversold zone and bogged down by liquidity problems.

"Contrarian calls are on the cards, but the depth of the market may not increase dramatically in the next five sessions. Short-terms players, such as hedge funds and position traders, are expected to be active this week. But the entry of long-term players, such as FIIs and high-net worth individual investors are likely in the next ten days or so when the positive signals would be clearer," Mr Easow observed.

Mr Ramesh Damani, a market analyst, felt that the market outlook was yet to become exciting. He predicted continuation of a range-bound movement and lacklustre trading in the absence of a clear trigger. "This week is likely to be marked by poor volume and lack of follow-through," Mr Damani added.

According to market players, a beginning of a substantial bargain hunting exercise at lower level would play a crucial role in determining the emerging trend in the next couple of weeks. "In terms of long-term investment, most of the top rung shares are currently at attractive levels," Mr Easow pointed out. Echoing the same view, Mr Mahajan added that small investors needed to be cautious and not panicky about the corrections ahead.

In the short-term Mr Mahajan is bullish about IT, sugar and diamond counters. He felt the Sensex heavyweights were likely to rule firm this week. Despite the `review' of the first quarter results by Wipro, Mr Mahajan identified Infosys and Wipro among the likely gainers of the week. (Mr Mahajan disclosed that he did not have any holding in these two stocks.)

Mr Easow's call was in favour of software, FMCG, steel and bank shares. "The top software stocks such as Infosys, Satyam Computer Services and Wipro are like to move up. Among the banking sector stocks I am bullish on South Indian Bank (SIB)," he said (Mr Easow is currently long in SIB and Satyam Computer).

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