Correction, profit-booking may pull indices down this week

Our Markets Bureau

Mumbai, Nov 4: After gains last week, marketmen see correction and profit-booking during the week ahead, especially because of the prolonged current uncertainties and escalation of tension at the border. With the encouraging announcement of introduction of individual stock futures last week already factored in, marketmen are likely to book profits that may push both stock prices and indices during the week ahead.

The benchmark BSE-30 Sensex closed on Friday last at 3,052.60, up 30.44 points from the previous close. Traders say, a correction of around 100 points from Friday’s close level is not ruled out.

The ITC counter is expected to remain in limelight to factor in the full impact of the Supreme Court’s ban on smoking in public places and in public transport announced last Friday afternoon.

This had rattled the marketmen who had rushed to offload their investments.

Sentiments may also be sluggish during this week because of the feared negative trend in the overseas markets, traders said. Last Friday, the US authorities released the data of unemployment for the month of October which indicated a sharp jump from 4.9 per cent to 5.4 per cent, signalling further slowdown in the US economy. This figure is expected to have its adverse impact on the US markets on Monday, which in turn would impact the domestic market from Tuesday onwards.

An analyst with a leading research outfit of a domestic brokerage house said, during the coming week, the market is expected to witness a pull back effect from the operators in the absence of any encouraging news forthcoming. The announcement of individual stock futures has already factored into the sentiment and its impact will be felt only after actually trading in stock futures begins.

Even technically, the market is weak, as the market breath (ratio of advances and declines) was at 40 per cent. Last week, it was some what higher. On the NSE, advances were worth Rs 3,860 crore and declines Rs 4,544 crore, while in the previous week, at NSE these figures were Rs 4,283 crore and Rs 3,203 crore respectively. On BSE last week, advances were Rs 2,2829 crore and declines were Rs 1,854 crore. This decline in the figure indicates slowdown in upward momentum, said technical analyst Vijay Bhambwani.

“The 3,100-level reached by Sensex during the current week was the highest in the last couple of months. The Sensex closed on Friday below the opening level which indicates bar reversal. The immediate upper resistance level for the Sensex is 3,100 and the next one will be at 3140, where the market fell with a gap of 80 points after the September 11 attacks.”

On the down side, lower support for Sensex may come at 2995, 2885 and 2800, Mr Bambwani said. However, the possibility of the Sensex reaching the lowest support level is bleak, barring unforeseen situations like further escalation of tension at the border.