Dated 2nd February, 2009

Markets moved up sharply after falling for 3 consecutive weeks. Stocks across all sectors moved up and most of the moves were due to short covering more than anything else. Metals, Auto, Banking and Sugar were sectors, which showed rises. Reliance Infra, Unitech, Zee, SAIL, Ranbaxy, Sterlite, Reliance, ICICI Bank and RPL were among the major Nifty gainers. Suzlon, GAIL and PNB were the only counters which ended the week in red.

The rally we saw just now is purely due to short covering and is not backed by genuine buying and hence we feel that it is not sustainable. The bounces that we are witnessing are bear market rallies, which have the tendency to create lower tops. We feel that it will take a very long time for this bear market to reverse or even find a bottom. One should trade on both sides once the markets finish the fall and form a trading range. At this point in time we recommend remaining only short. Short term resistance on Nifty exist at the current levels and a close above the Friday’s close may see Nifty trying to stage back to 2950 and further 3100 levels. But that looks an uphill task given the fact that markets already rallied quite a bit last week. One should not be fooled by the rallies of this kind and continue selling without worrying too much about the upside. We expect fall in Sugar, Cement and Infrastructure stocks in the following weeks and hence recommend traders to build short positions with adequate stoplosses.