Karvy: Weekly review: Markets scaling newer horizons

After more than 33 months, both the benchmark BSE Sensex and NSE Nifty spectacularly revisited the 20,000 and
6,000 levels last week!! However, the mood on the Street can hardly be described as “celebratory.” On one hand, in
an effort to time the market at lower levels, many retail investors were caught on the wrong foot yet again as the Nifty
jumped to 6,000 from 5,400 levels in early September. On the other hand, those few who are invested are becoming
increasingly skeptical and jittery of the current rally, as the market mayhem of 2008 continues to haunt investors.
Fuelled by strong FII infl ows, the recent rally has been primarily driven by large-cap stocks. The net FII infl ow for
September (as of 23rd of the month) was Rs20,000 crore, last seen in election-month May 2009. The same applies
to the rupee, which has strengthened to 45 levels against the US dollar. We believe that investors must change their
mindset and open up to long-term systematic equity and mutual fund investing. Ideally, investors should have a 5-
10-year horizon, with emphasis on sound companies and funds with good track records. This approach will obviate
the need to time the market, and investors will certainly not feel left out or let down.

From a trader’s perspective, the market is expected to remain in an uptrend. We advise investors to stick to long positions
and strictly adhere to their trailing stop losses. Moreover, it is recommended that the trader should continuously churn
his trading portfolio to mitigate any risk of correction in the near term.
Last week, we saw short positions being covered on every dip which resulted only in a marginal decline. There
are signifi cant short positions still left in the market; therefore, any immediate correction is unlikely ahead of the
September expiry. Long positions can be assumed in telecom, metals, energy and software at current levels or from
lower support of 5,930 levels. Short positions can be accumulated in cement stocks if the Nifty fails to sustain above
6,050-6,100 levels. The Nifty is expected to trade in a range of 5,900-6,100 levels this week.
Meanwhile, the country continued to receive good showers in September. According to the IMD, the cumulative rainfall
(June 1 – September 22, 2010) was 4% above the long-period average (LPA). The normal monsoon this year is expected
to drive domestic consumption, both rural and urban, apart from moderating infl ation levels in the coming months.