Dated 29th September, 2008

It was one of the horrible weeks that we saw for a long time. The market breadth was never so terrible in the recent past. Almost all sectors witnessed selling and many mid-cap stocks broke their respective long term supports and are looking extremely weak. The negative bias existed the entire week with two thirds of the stocks traded in the F&O segment losing between 5%-25%. Sun Pharma and Hero Honda were the only gainers in Nifty. Ranbaxy was the top nifty loser shedding nearly a quarter of its market capitalization. Wipro, Suzlon, Siemens, Unitech, Satyam Computer, Tata Motors, Hindalco, TCS, Infosys and ICICI Bank lost more than 10% week on week.

Markets are in a state of despair amid growing concerns of slow down. Markets always discount the future in advance and we see no exception this time. Markets are giving a clear indication of the times to come. The markets have corrected fair bit in the last week and a bounce back may be possible. Nifty may take support at 3860 and may give a small pull back rally. One must exit all long positions and wait for the opportunity to short the markets. We might see some soothing comments from the FM and statements from big corporates when they come out with second quarter results about the India growth story but that will only add to the pain. It is clear from the charts that the highs of January are history and let traders be not fooled by the ludicrous levels that we saw not very long ago. The downward momentum is here to stay and one must act fast and be not tempted by the valuations. The valuations in many stocks may look cheap but we are almost definitely going to see far more moderation in the valuations. The 61.2% retracement on Nifty comes around 3000, which doesn’t look impossible looking at the negative breakouts in most of the stocks. We see the possibility of the selling escalating as we move forward and we might see a protracted bear run. Utilize every rise to exit long positions and build shorts. There are a very few stocks which are depicting strength which include Tata Communications, Axis Bank, Glaxo, Hero Honda, Syndicate Bank, Lupin, HUL and Zee. Every other stock is looking weak and we recommend medium term traders to stay short and maintain short positions for another 2-4 quarters. SELL.


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