The indices bounced back in the last week after they dropped into an intermediate downtrend as the Sensex and the Nifty are now closer to their all time highs and the earlier intermediate tops of 20,238 and 6,012 respectively. The activity clearly shifted to the mid-cap stocks as the CNX Mid Cap index zoomed past its earlier intermediate top and made it into the new high indicating that now investors and traders will have to look at the mid-cap and small-cap stocks as these stocks have now started to outperform the large cap indices. The mid-cap stocks were lagging since the past one year and investors are now seeing good valuations in many of these stocks as compared to the large cap stocks.

Investors and traders must remain flexible and get into the stocks and sectors which outperform the indices. In this way they will get excellent returns. In the last week I had discussed about the refinery sector as stocks in this sector had started to outperform. We saw the result of this in the last week. Now as the activity has shifted to the mid-cap and small-cap stocks, and it could be time to get into these stocks. However remember, these stocks are high beta stocks and they will rise vertically higher and also fall vertically. Thus, keep a strict trailing stop.

In the last week, the Sensex and the Nifty came close to their all time highs, but have now paused for some breath, before returning on journey for new highs. The Sensex gained 4.18% and the Nifty gained 4.30% in the last week, as against a 7.62% gain recorded by the CNX Mid-Cap 100. Among the sectors, the BSE FMCG Index was the largest gainer ending 11.16% higher and was followed by the BSE Bankex which gained 7.75%. On the losing side, the BSE IT sector continued to be the weakest sector ending 2.21% lower and was followed by the BSE Healthcare index which registered a marginal gain of 0.74%. The targets for the Sensex and the Nifty to go into a fresh intermediate uptrend are at 19,988 and 5,967 respectively. The CNX Mid-Cap index has already moved into the new high territory and is in an intermediate uptrend and will have to drop below 7,178 to drop into a fresh intermediate downtrend. If frontline pivotals remain subdued, it is quite likely that the Sensex and the Nifty will remain sideways and the Sensex will move between 18,815 and 20,238 and the Nifty between 5,477 and 6,012, before breaking out and making to the ?new high? territory. However, investors and traders must continue to stay invested and pick up long positions in strong relative strength stocks.

Today I will discuss the tea sector which has seen a rise in the activity. The trading volumes have improved sharply and a few stocks in this sector look interesting.

Bombay Burma

Bombay Burma is the strongest stock in the Tea sector as this was the only stock which was in a major uptrend. And only when there is a rise in the activity in the mid-cap stocks that we are witnessing more stocks bottoming out and going into a major uptrend. Bombay Burma has been staying above its 30 WMA and has been exhibiting ascending intermediate tops and bottoms. This is the only stock which has been making into the new high territory from this sector and hence it is the strongest stock in this sector. Infact the usual leader Tata Tea, is in a major downtrend and the relative strength of the stock has been lagging. Investors must hold on to their long positions with a stop at 564 and any minor decline in the coming week can be used by investors to pick up long positions.

Assam Co

Assam Co is in a major uptrend but has been staying sideways between 13 and 34.75 since the past one and half years, and hence, the major trend is sideways. However, if the stock is able to move past its all time high of 34.75 and move higher, the major trend of the stock will turn up, and soon we will see higher levels. The stock has been hitting the upper circuit since the past few trading sessions and could soon make it to the new high territory. The relative strength line for the stock has been improving and will soon move above its earlier top and start outperforming the indices. Look for long positions near Friday?s close or in a minor decline. Use a stop at 23.85 and trail the stop as the stock moves higher.

Harrison Malayalam

Harrison Malayalam went into a major uptrend after breaking out of a nice base formation. Such breakouts from big bases are the ones that I really like, especially when the breakout happens with strong volumes. This suggests that all the selling by weak hands is over and bulls have taken over as can be seen by the strong volumes when the stock broke out of the base. The stock also went into a major uptrend by closing past its earlier intermediate top and the relative strength line for the stock has turned up making rising tops, confirming that the stock is outperforming the indices. Higher levels will be seen by the stock and investors must use a stop at 60 and trail it higher as the stock moves up.

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