The fall in the market value is attributed to the downgrading of Japan's sovereign rating by the international rating agency Moody's.

Japan's economic woes are showing no signs of abating. Steps taken by the government in the recent past have not really helped to uplift the Japanese market sentiment. Lowering of Japanese rating will have widespread repercussions on the economy of south east Asia countries.

Back home, the Tamil Nadu supremo has again started playing truant and this time the bone of contention is the water of the Cauvery river. The dispute of sharing the water has been going on eons now and nothing has come up on this front fromsuccessive governments. Jayalalitha wants the government to take a decision on this in three weeks. Mercifully, the government has time of three weeks to pacify this lady.

We have been anticipating the weakness in the market since last two weeks. During the current week the fears of downtrend in the index were confirmed. The index witnessed six consecutive days of lower close. The week under consideration saw the index losing 300 points over the close of the previous week. The loss was undoubtedly heavy considering the time in which the decline took place. On the daily charts, it is noticed that the index has broken below its rising channel suggesting that the market is not yet ready to start a rally, instead it could move in a sideways range.

Readers may recall that sometime in the middle of June we took a view that the index is likely to hover in range of 3470-2950 points. This is exactly what is happening now. Currently, the main catalyst needed for a rally is missing and that catalyst is liquidity.The liquidity is somewhat at lower levels and it has not shown an appreciable increase. Till a marked increase in liquidity is seen we cannot expect the market to rally.

The obvious conclusion that emerges from this discussion is that the market is expected to remain rangebound for a protracted period. The index, throughout the week, saw a steady decline; on the last trading day of the week the index saw appearance of a star. Lately, one sees the appearance of this pattern quite frequently perhaps this is due to the surrounding circumstances in which the market operates. Nonetheless the appearance of this pattern just above the support level of 3150 points suggests that the index may stage a small rally towards the level of around 3300 points. After this the index may again decline to a level of 2950 points. As most of the market action in the recent past has been sideways. Hence the use of the trend following indicators becomes limited. Nevertheless the MACD (Moving Averages Convergence Divergence: notshown here) has given a sell signal by moving below its trigger line. The 14-day RSI (Relative Strength Index) has moved below its equilibrium level. It is expected that in the short term the market could rally to around 3300 levels before another decline commences. Over the longer period the index is expected to remain in a range of 3470-2950 points.

Bajaj Hindustan: Good potential

In second week of May 1998 this stock showed a breakout beyond the level of Rs 105 a major resistance level. Subsequently, the stock rallied to around Rs 159 before the current decline. The breakout was heavy volumes and the decline that followed was on much lower volumes. Currently the stock is just above its support level of Rs 105. This is an excellent price to enter. The stock does show a potential to rise to higher and it is recommended as a long term buy for a targeted price of around Rs 200. One may buy. Keep a stop loss level below Rs 100.

Thirumalai Chemicals: worth buying Quite similar to the aboverecommendation this stock has also shown a breakout beyond the level of Rs 55. The breakout has been with a substantial increase in volumes. The 14-week RSI shows a strong momentum. One may consider buying this stock at current levels for a targeted level of Rs 100. Keep a stop loss level below Rs 50.

Britannia Industries: Book profits The second top in this stock at the level of around Rs 650 was accompanied by very low volumes suggesting that the stock price has its course. The 14-week RSI shows a negative divergence and the MACD is in a sell mode. Holders of this stock may consider booking profits.

State Bank of India: Buy long

This stock came out with good quarterly results. In the last two days the stock price has formed a bullish 'harami pattern. Traders may buy long. Keep a stop loss below Rs 197. Reliance: Buy long This stock is near its recent low of Rs 133. This is a support level and it can give a support to the falling price. One may buy keeping a stop loss below the level of Rs133.