Correction May Be Ending

Deepak Mohoni  A recovery in the second half kept last week's losses at a modest level, with the Sensitive Index finishing 1.11% or 170.80 points lower, and the Nifty 1.12% down. The CNX Midcap Index lost 1.72%. HDFC was the biggest winner among index stocks with a 5.2% gain. The other index stocks to go up included BHEL, Maruti Suzuki, HDFC Bank and Mahindra & Mahindra with gains between 4.4% and 1.7%.      Tata Motors was the biggest loser among index stocks with a 7.3% loss. The other index stocks to go down included Reliance Infrastructure, ACC, Tata Steel and Reliance Industries with losses falling between 6.6% and 5.2%.      HOEC was the biggest winner among the more heavily traded non-index stocks with a 27.3% gain. The other non-index stocks to go up included Yes Bank, IVRCL Infrastructures, Sasken Communication, Indiabulls Real Estate, Idea Cellular, Ranbaxy Laboratories and Bhushan Steel with gains lying between 9.3% and 4.4%.      Glenmark Pharmaceuticals was the biggest loser among the more heavily traded non-index stocks with a 18.3% loss. The other non-index stocks to go down included Raj Oil Mills, New Delhi Television, Excel Infoways, Sesa Goa, Cipla, Unitech and Chambal Fertilisers with losses falling between 16.4% and 6.5%.  INTERMEDIATE TREND  The market is still in an intermediate downtrend despite the recovery at the end of the week. The Sensitive Index would have to cross 15,545 for a new intermediate uptrend. The equivalent for the Nifty is 4,619 and that for the CNX Midcap Index is 5,981. The downtrend started with the Sensitive Index's August 4 high of 16,002. This is also the bull market peak as of now.      The downtrend may be on the verge of ending, as global indices were starting to get back into intermediate uptrends at the end of the week. A handful of stocks had already begun new intermediate uptrends, and a few fresh bull market highs were in place.      LONG-TERM TREND      Our market's long-term (i.e. major) trend is up, which is equivalent to saying that we are in a bull market. A closing below the last intermediate bottom of 13,200 would signal a bear market for the Sensitive Index. The bull market can be said to have started with the Sensitive Index's October 27, '08 low of 7,697, and has resulted in a 108% peak gain for the index in nine months.  TRADING & INVESTING STRATEGIES  Buying for longer-term investing can be initiated now that an intermediate uptrend appears imminent. Sectors which are underperforming are best avoided at this time, both for the longer as well as shorter terms. The underperformers include cement, automobiles, fertilisers and most of the FMCG stocks.  GLOBAL PERSPECTIVE  Many of the global indices had entered intermediate downtrends, but a few were back in fresh intermediate uptrends by the end of last week. The Dow would be in a clear intermediate uptrend and a fresh bull market high if it stabilises above 9,500.      A majority of global indices are in major uptrends now, and it could be safely stated that we are in a global bull phase. It would take a fall below 8,000 for the Dow to go into a bear market.      The BSE Sensitive Index had gained 5.4% in the twelve months that ended on Thursday, keeping it at the 6th place among 35 well-known global indices considered for the study.      Shanghai continues to head the list with a 19.7% gain. Turkey, Chile, Indonesia and Malaysia follow. The Dow Jones Industrial Average has lost 18.2% and the NASDAQ Composite has lost 16.4% over the same period. (These rankings do not take exchange rate effects into consideration). (The author is an independent technical analyst)