Huffs, puffs on Mt 12,000

Mumbai: After eight continuous weeks of higher weekly closings, it should be time for a change in market direction.

But expectations of extremely positive second quarter results from companies may be the one factor keeping the Indian equity markets afloat.

The Bombay Stock Exchange Sensex huffed and puffed on Friday before it finally crossed the 12,000-point mark. The last time it closed above this psychologically significant level was almost four months ago, on May 18, 2006.

“Eight weeks of ending higher means that a correction is due,” says Prem Daga, technical analyst at Professional Investor. In these eight weeks, the Sensex has gained 1,924 points, closing at 12,009.59 points on Friday.

The closest it came in the recent past to mirroring such gains was when it rose consecutively for the seven weeks ending April 7, 2006, and before that in the week to December 16, 2005. There was also a period when the Sensex saw 16 consecutive weeks of positive closings till August 19, 2005, gaining 1,626 points over the span.

According to Daga, the weekly candlestick chart (used in technical analysis) shows that this week’s candle is a doji.

“This means that the opening (index level) for the week and the close are roughly the same, indicating bearishness,” explains Daga. While the Nifty opened at 3,470.35 on Monday, it closed at 3,478.60 points on Friday.

Further, the intra-day highs made by the Nifty this week and the last, at 3,487 and 3,490 respectively, indicate resistance at 3,490, added Daga.

Friday’s marginal gain of 36.57 points for the Sensex came after the index had declined by more than 125 points from the start. The overall market gain was not decisive either, with losers outnumbering gainers in the ratio of 1.6:1.

On the fundamentals side, however, Indian companies remain on the road for greater glory with results for the second quarter expected to be good.

“We expect decent to good numbers from corporates this quarter. The key concern going forward would be the slowing down of the US economy, which may impact liquidity flows into emerging markets, including India,” says Shriram Iyer, head of research at Edelweiss Securities.

Foreign institutional investors have been net buyers of Indian equity worth Rs 2,038 crore this month, while mutual funds have also played their part in giving a leg up to the markets, being net purchasers by Rs 501 crore.