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Expect further correction

Thursday, July 26, 2007

Expiry jitters seems to have gripped the markets. The Indices came under sustained selling pressure. However they saw an all-time high F&O turnover of more than Rs 72,000 crore. It was a record total market turnover of Rs 91,063 crore.

The Nifty closed at 4,589 down 32 points, while the Sensex shut shop at 15,699, down 96 points

Ashu Madan, National Head at Religare feels that suddenly there were too many voices saying that this could be the fastest 1,000-point from 15,000 to 16,000. He adds, “Complacency was expected and weak global markets have triggered this; but the important thing to watch is how long will this continue? Will it continue for another 200 points?”

He feels that it depends on the liquidity inflows, the global markets and the short positions, which were within the system.

“For the first time I have noticed that probably in the recent past this is the first major correction, though it is 150 points. But whatever we had witnessed in the past, by that standard, it is a major correction; I see some visible short covering happening. Because of sheer tiredness and frustration, some short positions are being covered and as we were disusing yesterday we were caught in a situation where Nifty in particular is short, but in general all the stocks are plus.”

He adds that the markets have been primarily led by strong liquidity inflows, but it depends to be seen whether suddenly the liquidity flows are stopped, global markets are correcting and short positions are covered. “You might see more correction, that still has to be seen,” he said.

Shahina Mukadam, Head Of Research, IDBI Capital Market feels that the selling that has come about or the correction that has come about, has really been driven by the global markets.

“The main factor being the strengthening of the yen - surprisingly it was very strong in the last two days. That was, I think, the reason for all the markets to correct and Indian markets now being part of the global markets, we followed the trend. Over the next couple of days or weeks, I think the market may remain weak. In fact our technical analyst is talking of a downside of almost 200 points on the Nifty and equivalent about 1000 points on the Sensex. So we are looking at a bit of a correction. But with the market having run up so much, I don’t see that as a major negative, I see that as a buying opportunity going forward.”

She feels that it will be mainly the international news driven flows that could possibly lead to further corrections or reactions.

Posted by FR at 5:33 AM  

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