Markets may see another fall

European markets fell sharply last night, while US stocks bounced back to an extent. Asian markets had started well this morning, but are back in the red - and the global markets short-term trend remains down. We are likely to see another fall today as a result.

The market tumbled on Wednesday, with the Sensex plunging 615.22 points (3.96%) to 14,935.77, the Nifty 183.00 points (4.04%) to 4,345.85, and the CNX Midcap 254.05 points (4.11%) to 5,923.65. The largest negative contributions to the Sensex came from Reliance (100.2 points), ICICI Bank (57.8), Larsen & Toubro (47.3), Bharti Airtel (41.0), Infosys (35.3), Reliance Comm (30.8), State Bank (27.5), HDFC (26.4), Tata Steel (21.5), ONGC (19.3), BHEL (17.9), ACC (16.1), Hindalco (15.4), ITC (14.5), HDFC Bank (14.4), Reliance Energy (13.7), Satyam Computers (13.1), TCS (12.7), Grasim (11.4), Tata Motors (11.4), Mahindra (10.6), NTPC (9.7), Wipro (8.9), Ranbaxy Labs (8.8), Hind Unilever (7.8) and Bajaj Auto (7.8). The largest positive contribution was 2.1 points from Dr Reddy's Labs.

The market's breadth was poor, with declines outnumbering advances 4.46 times on the BSE, and 13.52 times on the NSE. The volume in advancing issues was 7.2% (73.5%) on the BSE, and 4.3% (83.9%) on the NSE, while that in declining ones was 89.5% (24.2%) on the BSE, and 95.6% (14.9%) on the NSE.

The number of Hotline stocks at 200-day highs fell from fifteen to one, while the number at 200-day lows rose from zero to four. The number at 5-day highs fell from 48 to 2, while the number of at 5-day lows rose from 29 to 183. The 240 stocks averaged a loss of 4.79%.

The nifty opened sharply lower and declined further until 1220. It recovered for an hour and then declined again to end the session at its lowest. The CNX Midcap followed a similar course.

The market is now in a well-established intermediate downtrend, with the Sensex having lost 958 points (6%) in about a week’s time.

The levels above which a new intermediate uptrend would begin have moved down to 15,569 for the Sensex, 4,304 for nifty, and 5,729 for the CNX Midcap.

The long-term (major) trend is still up (i.e. a bull market is on). It would end should the Sensex close below its last intermediate bottom of 13,550, the nifty below 3,980 and the CNX Midcap under 4,655.

The major trends of three more stocks - Patni Computers, Sun Pharma and MTNL - turned down yesterday.

Our market continues to be driven almost entirely by the global trend.

Most global markets have fallen into intermediate downtrends with the sell-offs of last week. The Shanghai index is an exception.

All global markets are still in major (long-term) uptrends, but a persistent decline could result in a few bear markets. The Dow would go into one if it closed below 12,000. Some of the European markets look particularly vulnerable.

Long-term investors should switch out stocks that have already closed at 3-month lows or worse.

The FIIs bought USD 106.3 million of stocks on Tuesday, and the MFs acquired USD 45.7 million worth. The FIIs are currently averaging daily sales of USD 36.8 million over the last five sessions, while the MFs are buying at an average rate of USD 50.4 million.

Almost all global markets are in intermediate downtrends now. Their major trends remain up, but this picture could change if the declines persists.

The Dow rose 150.38 points (1.14%) to 13,362.37, and the NASDAQ composite 7.60 points (0.30%) to 2,553.87.

Infosys was down 0.85% at USD 49.18, Satyam Computers was unchanged at USD 26.66, Wipro lost 1.23% at USD 14.42, Tata Motors lost 1.05% at USD 16.97, ICICI Bank went up 0.93% to USD 44.73, HDFC Bank dropped 1.86% to USD 85.00, Dr Reddy's Labs gained 0.13% at USD 15.69, MTNL fell 2.19% to USD 7.15, VSNL dropped by 2.39% to USD 22.45, Rediff.com lost 1.41% at USD 16.05 and Satyam Infoway went up 1.22% to USD 7.45.