THE stock market rallied at the end of the week to cancel out the losses made in the first half. The Sensex ended the week just 0.33% or 59.99 points lower, and the Nifty finished 0.19% down. The CNX Midcap Index gained 0.03%.
ONGC was the biggest winner among index stocks with a 3.3% gain. The other index stocks to rise included Hindalco, Hero Honda, Reliance Industries and ICICI Bank with gains between 2.8% and 2.4%. Tata Motors was the biggest loser among index stocks with a 6.9% loss. The other index stocks to go down included BHEL, State Bank, TCS and NTPC with losses falling between 6.7% and 2.6%.
Shalimar Paints was the biggest winner among the more heavily traded non-index stocks with a 40.0% gain. The other non-index stocks to go up included Kwality Dairy India, Jubilant FoodWorks, Educomp Solutions, TTK Prestige, VIP Industries, Arvind and Muthoot Finance with gains between 23.7% and 9.1%.
Aurobindo Pharma was the biggest loser among the more heavily traded non-index stocks with a 14.3% loss. The other non-index stocks to go down included Fineotex Chemical, Tata Motors DVR, Power Finance, Nitin Fire Protection Industries, SKS Microfinance, Reliance Capital and Indiabulls Financial with losses falling between 9.6% and 4.2%.
INTERMEDIATE TREND
The markets intermediate trend remains down, as does that of most global markets. However, the levels to be crossed for a new intermediate uptrend are now much closer at 18,450 for the Sensex, 5,525 for the Nifty and 7,925 for the CNX Midcap Index. (Figures are rounded up to the nearest 25). Another rally similar to Fridays would be adequate to trigger an uptrend.
Practically all global markets are in intermediate downtrends, and had fallen quite heavily before recovering in the second half of the week. Brazil had reached a tenmonth low, and several other markets were close to their threemonth lows. However, Brazil has entered an intermediate uptrend since then.
LONG-TERM TREND
A bull market was signalled for our market when the Sensex and Nifty crossed their previous intermediate tops and their 200-day moving averages. However, the two indices fell below their 200-day moving averages once again about a month back, and have failed to bounce back since then, invalidating one of the bull market signals.
The last intermediate bottom for the Sensex was at 17,775, and a breach of that figure would invalidate the other bull market signal as well. There has also been a recent increase in the number of heavily traded stocks falling into major downtrends. There is, therefore, some danger that the bull market that was signalled may be aborted. That danger will recede should an intermediate uptrend develop now.
TRADING & INVESTING STRATEGIES
Existing portfolios should be held on to as we are probably still in a relatively new bull market. Stocks which fell to their lowest in three months or more should be swapped for those which are at least 20% above their 2011 lows.
Further investments can be made now, but stocks which fell to their lowest levels in 2011 should be avoided. Quite a few banks belong to that list.
GLOBAL PERSPECTIVE
Most global markets are in intermediate downtrends. Brazil reversed into an uptrend last week, and our market could follow if the present rally lasts another day or two. The Dow will have to climb past its last minor top of 12,674 to end its downtrend.
Most global markets are in bull phases, though. Japan and Brazil are among the very few important markets that are in bear phases. The Dow would go into a major downtrend if it were to breach 12,000.
The Sensex gained 8.3% in the twelve months that ended on Thursday, up four positions to the 25th place among 35 well-known global indices considered for the study.
Sri Lanka continues to head the list with a 74.5% gain. Argentina, Indonesia, South Korea and Karachi follow. The Dow Jones Industrial Average has gained 20.9% and the NASDAQ Composite has gained 22.2% over the same period. (These rankings do not take exchange rate effects into consideration).
(The author is an independent technical analyst)