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Market Watch: Another attempt at Mount 6,000

The fact that the market is in the grip of local bulls is amply demonstrated by movements in sectors like power, writes Udayan Mukherjee.

india Updated: Dec 03, 2007 23:08 IST

After a volatile November, the bulls seem to be finding their feet again. The new series has started with a burst of momentum. The Nifty has climbed a few small peaks on its way to challenging the 6,000 summit that has proved to be an obstacle these last few weeks. It is not going to be easy, but current local sentiment seems strong enough to give it a really good shot this time. The good thing is that this time the market has breadth. The first couple of forays above 20,000 for the Sensex were fairly narrow moves with a handful of overvalued stocks making a tired dash of it. No wonder it turned out to be futile. Now, the market has spread out with the CNX mid-cap index hitting an all-time high on Monday and that has buoyed local participation. In the absence of foreign fund buying, large-cap heavyweights are still not exhibiting great momentum but the sheer upward pressure from the broader market may drag even the index past the psychological hump. It may be a case of the tail wagging the dog.

The fact that the market is in the grip of local bulls is amply demonstrated by movements in sectors like power. Most institutional investors and large brokerages are circumspect on valuations in this space, yet stocks keep cruising to higher levels. Clear signs of momentum overruling fundamental logic. The opposite is true of technology. Most brokerages and institutional investors are now positive on the sector, yet no great momentum is visible there; simply because retail has not tasted blood there and is reluctant to chase near-term trading gains in this space. In a market where institutional money was setting the prices, you would perhaps have seen exactly the opposite. This December belongs to the locals, till foreigners join the party in the New Year.

While signs are positive, the doors have not exactly closed on the bears. There is still work to be done to get to 6,000, close above that and not slip back immediately into the 5,500-6,000 band. The bears will try and put up a fight around those levels, particularly if some weakness is visible in the global space. If, however, there is no global setback this week and the Nifty does manage to scale 6,000, we could see another bout of short covering and fresh long build-up by traders. Breakouts into new highs often invite fresh trader
participation. But before that, expect some skirmishes between the bulls and bears this week; may the best man win.

Executive Editor, CNBC-TV18