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Friday, January 4, 2008

Who all are the biggest winners in the market?- Investor's Guide

The market bounced back last week, with the Sensex finishing 5.45% or 1,044 points higher, the Nifty up 5.43% and the CNX Midcap gaining 6.63%. Tata Steel was the biggest winner among the Sensex stocks with a 12.9% gain. Other gainers were Reliance Energy, DLF, Bhel, Wipro, HDFC and Hindalco with gains between 7% and 12%. Bajaj Auto was the biggest loser among the Sensex stocks with a 6.5% loss. Maruti Suzuki lost just 0.8%, and was the only other Sensex stock to finish lower.

Era Construction was the biggest winner among the more heavily traded non-Sensex stocks with a 38.7% gain, followed by Everonn Systems with a 38.3% gain. Mercator Lines, Parsvnath Developers, Adani Enterprise, Videocon Industries, Essar Oil, Alok Industries, IOC, Ansal Infra and Mundra Port all gained between 17% and 33%. Ispat Industries was the biggest loser among the more heavily traded non-Sensex stocks with a 2% loss. There were no other significant losers.

Intermediate Trend: The indices remain in intermediate uptrends, with last week's rally helping them avert the downtrend threat. The uptrend has started from the Sensex's November 22 low of 18183 for the Sensex and Nifty, while the CNX Midcap index has been in an uptrend since October 22.

The uptrend will end if the Sensex falls below 18886, the Nifty under 5676 and the CNX Midcap below 8430. Our market is one of the very few that has managed to escape an intermediate downtrend. The uptrend will become more stable if the global rally evolves into an intermediate uptrend.

Outlook For '08: The market's long-term (major) trend remained up during all of '07. The Sensex had gained 46.57% or 6,420 points until Friday, and the Nifty 53.28%. The CNX Midcap outperformed them with a gain of 74.39%.

Reliance Energy was the biggest winner among the Sensex stocks with a 314.7% gain. Larsen & Toubro, Reliance, Bhel, Tata Steel, State Bank, DLF and HDFC followed, with gains between 80% and 188%.

Infosys was the biggest loser among the Sensex stocks with a 19.9% loss. Other losers were Tata Motors, Cipla, Wipro, TCS, Mahindra, Satyam Computers and ACC with losses falling between 7% and 19%. The bull market will end if the indices close below their previous intermediate bottoms. These stand at 18183 for the Sensex, 5394 for the Nifty, and still 6463 for the CNX Midcap.

We will enter '08 with a strong possibility that we are in a bubble, as the market caps of several underachieving companies are rising on hope and hype, rather than performance. Hence, there can be a correction — perhaps along the lines of the one seen in May '06. However, bubbles are always unpredictable, and stocks can continue to rise beyond most expectations before the bubble bursts.
 
Short-Term Outlook: Global markets were rallying again after dipping on Thursday night and Friday morning, and this should lead to further gains at the start of the new week. A fresh global intermediate uptrend can mean more gains ahead. Europe and the US were rising again on Friday, and a global intermediate uptrend appears to be on the cards now.

Strategy: Fresh long and medium-term purchases should be made only after the next intermediate downtrend ends, and provided the bull market continues. Day traders should find the mid-caps more profitable, as the larger moves are happening in this category once again.

The intermediate uptrend looks stable for now, and swing traders can carry positions overnight on the long side with normal risk. Please note that all forms of short-term trading will succeed only with a proper risk and money management strategy.

Global Perspective: Most major global markets rallied all week, except for a sell-off on Thursday night and Friday morning. However, most of the main global indices are still in intermediate downtrends, but a persistent rally should lead to an early confirmation of an intermediate uptrend.

Several global indices went into these intermediate downtrends after making lower intermediate tops, and there's a question mark on the global bull market. A closing below its last intermediate bottom of 12700 will be a bear market signal for the Dow, and such an event can well trigger a global bear market too.

The Sensex's gain for '07 (until Thursday) stands at 46.6%, making it the fourth best performer among 40 well-known global indices considered for the study. Shanghai heads the list with a 98.4% gain. Indonesia and Pakistan follow with gains of 47.1% and 51.7%, respectively . (These rankings do not take exchange rate effects into consideration). The Dow Jones Industrial Average has gained 7.2% and the Nasdaq Composite 10.8% during the year.

(The author is an independent technical analyst)