The Hindu reported on August 2 about the fall in the index like this:
“In a major shake-up on stock exchanges, the benchmark Sensex lost 615.22 points to end below the 15000-mark. The meltdown in the Indian stock prices on Wednesday was attributed to negative news flow on sub-prime mortgage — which related to realty markets — worries from the U.S. While Asian markets witnessed a sharp fall in their indices, India’s Realty index was the worst hit, which was down by over 6.64 per cent and selling was seen in scrips across sectors.”
We can understand the fall in realty index and real estate stocks as a result of US events, but why there should be across the board selling in other sectors?
This is what The India Street analysis said about index:
Review dated July 20:
“…This means that the market is witnessing profit booking at higher levels. Going by this chart, we may see further corrections next week. But those corrections will be good for the index and the overall market.”
Review dated July 28:
“…The index has just managed to break the 38.2% retracement from 4648 today at 4438 but managed to close above it. 61.8% retracement works out to 4309. It falls below the first support 4363 and should be the downside target for this correction.”
Nifty had lost 174.60 points last Friday (July 27). On Monday (July 30) we saw a near flat trading session which lost 5.15 points. A red candle with a doji body appeared yet again. We discussed this doji body in our weekly review dated July 20 and monthly review dated July 28. On Tuesday index went up by 88.80 points. Nifty fell by 183 points on Wednesday. Thursday’s trading session witnessed a green candle and a doji body, gaining 10.50 points. Today the index once again went up by 45.20 points.
Overall, Nifty lost 43.65 points or 0.98% this week. The daily chart of nifty is displayed below.
When the two green candles of Thursday and Friday are superimposed we get a green candle as shown in the box. This leads to “Harami” candlestick pattern. Harami means pregnant and the Japanese view this as a confusing signal though it is a bullish pattern. This pattern needs to be confirmed by a green candle on Monday preferably with an upward gap opening and a close above 4530. For this to happen, the index needs to gain at least 128 points. But the intraday chart of August 3 shows that the bulls were losing momentum right through the trading session.
Chart courtesy: NSE
It can be seen that the market opened on positive note but gradual selling occurred during the day and the index failed to break its intraday resistance.
As I mentioned last week, nifty touched an intra week low of 4327 on Thursday, just 18 points more than the target of 4309 and it has managed to bounce back.
Forecast for next week:
If the index manages to close above 4530 with a green candle (either full upward gap or even a partial upward gap) on Monday, we can confirm that the ongoing correction is over and the market will resume its uptrend.
Going by the intraday chart on Friday, this doesn’t seem to be a possibility. In that case, market may witness some more correction. However, 4363 and 4245 are the support levels between which the index should reverse.
The short sellers need to be cautious since the nifty has not yet broken the short term supports and medium/long term trend is still bullish.
Advance / Decline Ratio:
| Date | Adv. | Dec. | Unch. |
| 30-Jul-07 | 517 | 581 | 27 |
| 31-Jul-07 | 779 | 325 | 19 |
| 01-Aug-07 | 75 | 1043 | 10 |
| 02-Aug-07 | 592 | 508 | 30 |
| 03-Aug-07 | 736 | 370 | 27 |
This leads to an overall advance % of 47.87, decline % of 50.13 and unchanged % of 2.00% for the week.
Top Gainers / Losers among Index stocks:
| Scrip | % Gain | Scrip | % Loss |
| SBIN | 9.14 | M&M | 13.04 |
| HDFC | 4.30 | NATIONALUM | 11.24 |
| LT | 4.13 | TATAMOTORS | 6.12 |
| BHEL | 3.75 | HINDALC0 | 6.07 |
| GRASIM | 3.54 | ZEEL | 5.58 |
Top Gainers / Losers in overall market:
| Scrip | % Gain | Scrip | % Loss |
| TIPSINDSLTD | 38.96 | CANDC | 20.66 |
| JINDALPOLY | 28.48 | KOTHARIPRO | 18.33 |
| JAICORPLTD | 27.63 | VENKEYS | 17.55 |
| VOLTAMP | 27.30 | AXIS-IT&T | 16.61 |
| JINDALPHOT | 25.74 | SHAHALLOYS | 15.87 |
The India Street analyzed Puravankara Projects Limited IPO. The issue was to close on August 3 and it received a very poor response. Bids for 7.6 million shares were received till 1700 hours on Friday, for an issue size of 21.47 million shares (36% subscription). This is attributed to the negative news on the realty index and real estate sector.
The Book Running Lead Manager to the issue has informed the National Stock Exchange that the issue will close on August 8, 2007 instead of the earlier closing day of August 3, 2007. Further, price band has revised from Rs.500/- to 525/- per share to Rs.400/- to Rs.450/- per share.
Everonn Systems India Limited got listed with a big bang on August 1. Its issue price was Rs.140. However it opened with a premium of Rs.105 at Rs.245, reaching a high of Rs.567 on the day of listing. It closed at Rs.474.25 on August 3.
Realty Index:
Chart courtesy: BSE
The daily chart of BSE realty index is shown above. Watch the upward and downward gaps in the chart. The downward gap indicates that there would be some sell off, as it was confirmed on August 1. So it didn’t come as a surprise. Same principle is applicable for the upward gap too.