The technical position had less to do with the fall and the rally that has occured in the past two weeks. With odds for the BJP governement survival turning favourable, the Sensex showed a sharp recovery, almost covering the highest possible gain in a 10-minute time. And the credit goes to the most unlikely person, Omprakash Chautala, the leader of Lokdal. With a 215 points gain on Friday, the Sensex was up by 34 points on weekly basis.Since the problem of the goverment's survival is being solved for the time being, the immediate outlook for the Sensex is undoubtedly bright. And if the government does manage to overcome the no-confidence motion, then an immediate targe for the Sensex could easily be place at 3750 points, the level when the Jayalalitha drama started.
Hitting the upper circuit, almost all the pivotals including software and pharma stock participated in the 215-points rally. In fact, when pivotals where not available, trading focus shifted to stocks which were available at that time. Stockslike Bhel, Castrol, and Hindustan Lever could be placed in this list.
In the case of the government's survival, the trading community would less chance to take position as the pace of the uptrend is expected to be fast. In any case, a major portion of that has already occured and the rest would be discounted at the Saturday opening, leaving minimum leverage for a fresh entry.
For those who failed to take a position on Friday, have grim chance of a comfortable entry on Saturday. For this reason, they can wait for a correction but it would be at the risk of missing the entire rally. The only thing that can be done at the current level is a partial entry, say 30 per cent of the original position.
For the Sensex, if the government survives a rally till the level of 3750 could be effortless. But above this level, it would require to make special effort and it should display real strength which is difficult to judge at this juncture.
Among the pivotals, counters like Hindustan Lever, ITC, ACC, Hindalco andCastrol have the potential of overperforming the market. Stocks like Bhel, Reliance, MTNL, and State Bank would also show a recovery but the rally may not last long as these counters are in a major negative trend. Other counters where substantial gains are expected are : Cadbury, Exide Industries, Brittania, Carrier Aircon, Colgate-Palmolive, Digital Equipement, HDFC Bank, Gujrat Ambuja Cement, ICICI, NIIT, Pentafour Software, Punjab Tractors, Voltas, and Wockhardt.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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