Indian Stock Markets: Looking for the Bottom

Manipulation is not only in India, but across the globe. US market movements of yesterday is the case point. The operators hammer the stocks easily when the investors are dead scared and then buy out when the stocks are dead cheap. Investors fall prey to their tunes. Indian markets are much below where we must have been. Only, the domestic Institutions and Mutual funds along with the operators will have to take initiative to take our markets to its real worth, may be 14000 on sensex. Asian markets this morning are trading 3 to 4% higher. If we open and trade in green continuously for the session, then we can expect some positive days next week. If we trade in negative, particularly if we break Wednesday' low, we will surely touch or create a new 52 week low in coming days. We have enough reasons to bounce up today, however depends on the bear power, how far they get scared of the sharp rebound in US and Asia along with our unprecedented fall in inflation to single digit below 9.

Please note that the following report has been edited this morning to account for the mood change in international markets.

07:30 a.m.- Wednesday was a flop again for the bulls. Despite larger than expected IIP numbers, our stocks took the lead in falling and fell 3% down at close although not the day's low. Thus, any hopes of reversing the bearish trend was laid to rest. Average volumes with a negative market depth of AD ratio 1:4 suggest tired bull liquidation along with fresh shorts. Institutional selling was marginal.

Close on the heels of a negative Wednesday across the Globe, Thursday gave a hope of a bounce. That was also belied and the blood-bath was more pronounced on Thursday. Asia sunk deeper, Hangseng and Nikkei falling over 5%. Europe too had severe cuts on Thursday, however closed mixed after a very bad day on Wednesday. US stocks opened in green on Thursday after severe drubbing the indices got on Wednesday. However, they slipped into red soon thereafter. Bush administration deciding not to buy out loss making entities proved harming the markets on Wednesday. On Thursday, jobless claims report showed the claims rose more than expected. Tech Stock Intel cut its outlook. Wal-Mart sprung a positive by declaring better than expected EPS, however the guidance were disappointing. Crude was 2.5% lower, however settled 3.6% higher at about US$56/bbl taking the Energy stocks higher. Dollar has improved against most currencies including Rupee, however lower against Yen. It is 95.78 Yen and 48.30 Rupees. The US indices almost tested the 10th October lows, which are the 52 week lows as well and bounced to close at the sessions high, 6.7% higher on an average. Nasdaq and S&P traded even below the recent low, being the 52 week lows. Dow traded a few points away from the recent low.

Sensex continues to be bearish. The blood bath of Wednesday in International markets along with the extension of the same in all except European and US markets will have the effect in our markets too. Had we been open Thursday, we also would have seen slaughterhouse scenes in our bourses. Now, there is going to be a combined scene on Friday. Being already bearish, we will have a doubtful start today. Only saving grace is that along with good IIP numbers, we have lower Inflation figures and lower than expected crude price at 56. Crude which was at 148 US$/bbl is at just 56. We must feel happy about the recession in US as we will enjoy lower fuel price now. We are saving so much of precious foreign currency on this account. Along with that Foreign remittances from NRI's and PIO would also swell. Projects abroad and exports will earn higher too. Negative scenes are in the job market and foreign investments apart from slack FII investment. It is heartening that FII's have eased the selling pressure in the market. They may not start buying so soon, still their not selling itself will be a boost to the market. Inflation have dropped down maximum since 1990. It has fallen below 9% to 8.98% against 10.72% a week before and against a predicted 10.28%. I remember being abused by guys on MMB when I said inflation will come to single digit before year end. And that has happened in first half of November, 6 weeks ahead. With Oil Prices falling further, the inflation may come down further and stabilise around 6%, subject to Crude being below 65 US$/bbl. Lower crude and lower inflation will encourage Oil Ministry to go for a fuel price cut very soon, may be today itself. RBI may also go in for further rate cuts in days to come, to energise the sagging industrial activities.

Sensex will open flat to better and drift lower, probably to hit Wednesday's lows. Depending on Institutional activity, we may see some recouping. When I say Institutional activity, I meant no selling even if no buying. US recession will continue for some time and we need to go on our track, not to be dictated by Dow and Nasdaq. We have seen the latest bottom or are likely to see the bottom today, in all probability. If we break below Wednesday's bottom, then 52 week low of 27 Nov will be revisited during November, before we get back to our own determined track and trajectory. If we fall below 9299, then 9062 may be the lower target for today. We may test the support at 9299, below which 9062 will be the support. At higher levels, if we move above 9750, then 9929 is achievable. Day traders may buy if we find good buying support above 9614. Strong resistance is possible at 9929-9968 range. A break and close above 9968 with good volumes will indicate reversal of the ongoing bearish trend.

Supports: 9457, 9299, 9181, 9062 Resistances: 9733, 9851, 10009, 10166
Likely Trading Range: 9105-9929