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Jayanta Mallick

THE bears last week decisively generated a fear psychosis in the stock market and challenged bulls to enter the ring. Bear operators took full advantage of the poor liquidity in the market and hammered down the support barriers. After a steady fall over five consecutive sessions, panic ruled supreme at the close of trading on Friday. The Sensex slumped by 4.46 per cent and breached the psychological support level around 2,930 to close at 2,875.53.

"Whatever little money the system had either went on the sidelines or was taken out. This week may continue to be jittery and indices are likely to drift down," commented Mr Darshan Mehta of moneypore.com.

"The most disturbing aspect of last week has been the sharp decline in prices of heavyweights on low volumes and that too in a short time-span," observed Mr Saumil Trivedi, a technical analyst.

Reliance slid from Rs 230.40 to Rs 224.55 in one hour on a volume of 7,21,385 shares on the Bombay Stock Exchange last Friday. This meant erosion in the market capitalisation of the stock of Rs 816.89 crore on a traded turnover of just Rs 16.32 crore.

Hindustan Lever declined from Rs 166.25 to Rs 158.30, also within an hour on Friday, on a traded quantity of 13,10,527 shares. As a result of that hour's trading, the company's market capitalisation dropped by Rs 1,749 crore on a stock turnover of Rs 21 crore.

Describing the implications as ominous, Mr Trivedi felt these examples not only exposed the hollowness of the market but also underlined the problem of exiting even from large-cap stocks. Small amount of selling put disproportionate pressure on prices, he pointed out.

"For any hope of revival, the Sensex has to move up and remain above 2,930. The nearest support range for the benchmark index from the current level lay around 2,800-2,830 points. The next support level may be available at around 2,680-2,700 points range," Mr Trivedi forecast.

According to Mr Mehta, currently the market is bereft of bulls who can make effective contrarian calls. He felt that the second quarter results of HLL, HCL Tech and Satyam Computer Services changed the direction of the market and pushed it into the negative zone. ITC results also indicated that the company's diversification efforts were still a drag on its profitability. "Valuation perception has suddenly changed for the worse," he added.

The market apprehends that the Reliance Industries Q2 results, due this week, may depress sentiment further. "Globally, petrochem and its derivatives are going through a phase of weakening demand and declining prices. With this negative overhang, the Reliance group is stepping into telecom, where margins are under severe pressure. Thus, the outlook for RIL could change for the better only if the company comes up with extraordinary results and future guidance," Mr Mehta observed.

In the gloomy scenario, the market is likely to stress more on the negatives for some more time, brokers and analysts felt. For example, in the IT sector, the market is no mood to allow the benefit of doubt to the second rung companies in terms of their prospects in grabbing a substantial share of the outsourced businesses from the US and Europe.

For the auto sector, a majority of market players are becoming apprehensive as to whether the top players will be able to maintain the pace of their bottomline growth.

The Securities and Exchange Board of India probe into the Gujarat Ambuja acquisition of stake in ACC may dampen the sentiment for cement sector stocks.

"To top it all, neither the macro-economic figures nor the political developments are not in a position to inspire confidence among the investors," said Mr Mathew Easow of matheweasow.com.

Even Infosys, which was by and large unaffected by the bear onslaught, was quoted at a discount in the futures market. The coincidence of the two factors — drop in the market spirit and settlement of the October contracts — may make the weather choppier this week.

This week, the last one before the beginning of the new "Samvat" (trading year) from Diwali, may not see significant fresh investments as participants would like to end the current year in cash.

Mr Easow said the Nifty might see the final bottom somewhere between 850 and 900 points. To turn positive, it needs to cross the 985-point mark, he added.

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