For Sensex, mood's just right for a peak show - 04 Jul

With the bellwether Sensex just within sniffing distance of its life-time high, mood for the week ahead is bullish. The market may extend last week’s gains following the smooth rollover of positions from the June 2007 series to the July 2007 series in the derivatives segment, and the build-up of fresh positions.

The steady progress of monsoon and falling inflation numbers are expected to continue to provide cheer to market participants. While the BSE Sensex is just about 73 points away from its all-time high of 14724 (struck on February 9, 2007), the S&P CNX Nifty is 45 points away from its all-time high of 4363, struck on June 4, 2007. IT bellwether, Infosys Technologies, is all set to kick off the earnings season on July 11, 2007.

“The indices have closed near the intra-day high of the session and surpassed the 4300 levels with a positive market breadth and above average volumes,” says Vijay L Bhambwani, CEO, BSPLindia.com. “Both indicate optimism, and the closing is the highest-ever. That shows a prevalence of bulls over bears and the outlook ahead being positive,” he says.

He feels that the coming session is likely to witness intra-day levels of 4349 on advances and 4293 on declines. “Watch the 4293 level on Monday, should this level not be violated, the strength will gain momentum,” he says.

The beast of inflation has been tamed, with the figures out on last Friday, the lowest since the end of April 2006. This should partly ease concerns on the interest rate front. In the US too, Americans spent less than forecast in May and the Federal Reserve’s preferred inflation gauge cooled, signs that a consumer slowdown is restraining price pressures.

Last week the action was mainly in the small-cap and mid-cap segments, with the BSE Midcap index hitting an all-time high. BSE Capital Goods index, BSE’s banking sector index Bankex and BSE Consumer Durables index also scaled all-time peaks.

While the Sensex gained only 1.2% over the past week, BSE Midcap index and BSE Smallcap index gained 2.4% and 2.9%, respectively. This trend of mid-caps outperforming the large-caps is expected to continue.

However, the only concern could be on the oil price front. Crude oil prices ruled above $70 per barrel mark in New York on Friday, closing at a 10-month high. Oil prices climbed above $70 for the first time since August 2006 after an energy department report showed that US gasoline supplies fell last week as refinery operations rose.