Chartists think index will test low of 13,800
MUMBAI: The Bombay Stock Exchange Sensex crossed the 15k mark for the first time on July 6, 2007.
On that day, it touched 15,007 briefly, and ended the day at 14,964. On Tuesday, it again went past 15,000, but in reverse gear. After dipping to 14,645, the index crawled back to close at 14,889, a loss of 176 points from the overnight close of 15,066.
This means anybody who had bought into the upbeat mood on that fateful July day last year is back to square one after an 11-month rollercoaster ride.
Technical analysts, who read the charts and graphs on daily index movements, don’t feel very good.
Shrikant Chouhan, vice-president (technical research), Kotak Securities, says: “Yes, we can say it’s significant. Generally, traders or investors are not looking at technical levels like 14,780 or 15,300. They go for basic levels like 15,000 or 14,000.
From that point of view, the break below 15k is a psychological blow.”
He says in the near term, a bottom could emerge around the 13,800-14,000 levels on the Sensex, which will be a 40% correction from the high of 21,200 in January.
“I expect the market to re-test the August 2007 low of 13,800. That may act as a good support as investors with a six to nine-month horizon might find a 30-40% fall from the peak a very good level to buy. If that happens, one could see a bounceback of 12-15%, adds Chouhan.
Manish Sonthalia, equity strategist, Motilal Oswal Securities, feels the Sensex bounceback in the course of Tuesday’s trading from a low of 14,645 lends some hope.
“It’s comforting that we made a new intra-day low for 2008 and bounced back from there. But I’m not sure if we are out of the woods, yet.”
Sonthalia says that the uncertain macro-environment makes guessing the market’s bottom difficult. He feels any positive data like industrial production numbers, or figures of advance taxes paid by companies, could help the market.
The 50-stock NSE Nifty index made a new low for the year, closing at 4,449 on Tuesday.
Ashish Shroff, technical analyst, Ambit Capital, who tracks the Nifty, has this to say: “The Nifty wiped out almost 500 points in the last six days and lost almost 10%. The charts are showing oversold signs. We are expecting an intra-day or near-term bounce which could take Nifty towards 4,550-4,600 levels.”
He is advising his clients not to short-sell at current levels – which means he is expecting a short-term bounceback. “Our advice is to cover the short positions and wait for the market to stabilise around 4,550-4,600 range.”
