Weekly Watch - Jan 11 2009

The Sensex plunged 551 points 5.5% during the week gone by and the Nifty slipped 174 points or 5.7% to finish at 9406 and 2873 respectively.


The sell off actually came during the last two session, on breaking of the Satyam story on the news channels.

Readers would recall the October 27, 2007 and 2nd December 2007 trendline. The Sensex has now closed marginally below the trendline at 9406. The bearish story for the Sensex, however, gets confirmed only if it breaks the 9162 low formed on 29th December.

The Nifty is now in a confirmed downtrend. It has closed below the trendline drawn for the same dates as above for the Sensex and has also broken the low seen on 29th December.

We closed the week on a bearish note.

Satyam developments

On Friday evening after the markets closed came the news that the Government has suspended the Board of Satyam Computers. The Government will announce a new board of directors.

From a shareholder's perspective , this move augurs well. Unless the board is led by some one of the stature of Mr Murthy or Mr Premji , it will not enthuse the market, though the suspension of the earlier board itself would be good enough to propel the stock higher.

The move by the regulators to get the quarterly results of Sensex and Nifty constituents reviewed by an expert panel is aimed at improving the confidence in the numbers reported but may create a flutter Monday when the markets reopen.

The markets are likely to punish most stocks in the indices. My sense is that at this point of time, the markets have no appetite to take additional risk and investors are likely to vote with their feet. Having seen values decline swiftly in Satyam on Wednesday and DLF on Friday, no one would be wanting to take chance.

It will be market that will shoot first and ask questions later. Brace for a very sharp fall in the coming days, in which lower lows will be formed. Don't tell us, we didn't warn you.