Citizens' Issues
2G Scam: Dr Swamy to appeal to High Court against trial court's decision

In a little reprieve to Home Minister, the special court dismissed the plea of Dr Swamy to make Mr Chidambaram co-accused in the 2G spectrum allocation scam

Dr Subramaian Swamy, president, Janata Party said he will file an appeal in the High Court and place more evidence on record after his plea to make Home Minister P Chidambaram co-accused in the 2G scam was dismissed by the trial court.

Justice OP Saini of the Special Court while delivering his verdict said, "....prayer of Swamy to make Chidambaram an accused is dismissed".

Speaking with reporters outside the Court, Dr Swamy said, "I am surprised by the verdict. This order deserves to be reversed. I will not give up and will approach the High Court within three months".

Dr Swamy had moved the Court seeking to make Mr Chidambaram as co-accused in the 2G spectrum scam. The Janata Party president alleged that Mr Chidambaram, the then finance minister, is as culpable as former Telecom Minister A Raja in determining the prices of the spectrum and in allowing the dilution of shares by telecom companies post allocation.

Earlier this week, the Supreme Court referred the matter on probing Home Minister P Chidambaram's role in the 2G scam to the Central Bureau of Investigation (CBI) Special Court.

On Thursday, the apex court cancelled all licences given to 11 telecom companies issued after January 2008. The Court observed that 85 out of the 122 licences granted by the UPA government on or after 8 January 2008 were outside the eligibility criteria for allocation of the 2G spectrum. "The 122 licences for 2G spectrum were granted in arbitrary and unconstitutional manner," the Court said.

In another important judgement, the Supreme Court refused to sanction a Special Investigation Team (SIT) to over-see the CBI inquiry in the 2G spectrum allocation scam. Instead, the apex court said, the Central Vigilance Commission (CVC) should monitor the investigation and the CBI should submit its status reports in sealed envelopes to the Commission.

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Nifty becomes overbought on the weeklies now

The next cyclical top falls in the end of March 2012, so it will be interesting to watch how the market behaves from here on as it is now a desperate situation for the Bears to pull things back

S&P Nifty close: 5325.35

 
Market Trend
Short Term Up            Medium Term Down            Long Term Down


The Nifty opened lower and fell sharply on the very first day of the week to hit the projected S1 level. The subsequent rise was however so sharp that the Bear ran for cover as the Nifty almost hit the projected R2 level (5,343) of the week and close with a crisp gain of 121 points (+2.33%). Volumes during the rise were significantly higher compared to previous week. The Sectoral Indices which outperformed were BSE Reality (+4.77%), BSE Auto (+3.54%), BSE IT (+3.33%), BSE Bankex (+3.20%) and BSE Teck (+3.05%) while the gross underperformers were BSE CDS (-2.80%), BSE CGS (-0.97%) and BSE PSU (+1.04%).  

The weekly Histogram MACD continued to move higher and is above the median line indicating strength. We have seen the Nifty rally for the 5th consecutive week (Fibonacci number) in which it has risen more than 14% and in the process has also broken above the weekly channel shown in the chart. This is a sign of a further rise in the weeks ahead but considering the overbought nature of the weekly oscillator one should keep a strict ‘Stop Loss’ on longs at the upper trendline of the channel, pegged around 5,215 points.

Here are some key levels to watch out for this week.
  • As long as the S&P Nifty stays above 5,245 points (pivot) the Bulls are in control even in the shorter time frame and the Bears have to make efforts to push prices below this.
  • Support levels in declines are pegged at 5,156 and 4,987 points.
  • Resistance levels on the upside are pegged at 5,414 and 5,504 points.

Some Observations
1.    After the sharp dip on the very first day of trade in which the Nifty fell to the S1 level of the week of 5,078 points the Nifty recovered the very next day and broke above the resistance pegged in the 5,221-5,237 points.
2.    This resulted in desperate Bear covering as Nifty rose sharply and closed above the resistance line of the channel. If the Nifty is able to sustain above this channel for 3 consecutive weeks then the intermediate downtrend will be deemed to be over and there could be significant upsides in the months ahead. However, it is premature to jump to such a conclusion at this moment.
3.    Despite the sharp rise, weekly averages continue to be negatively phased implying that this rally requires some more foundation to sustain for a longer period.

Strategy
The small correction we had envisaged last week lasted for only a day but was sharp as it fell to the S1 level for the week. However, the ensuing recovery was also very sharp catching the Bears unawares and sending them scurrying for cover as importance resistance levels mentioned above very easily taken out. Immediate resistance is pegged at 5,399 points (top for the week ended 28 October 2011), 5,404 points (61.8% retracement of the decline from 5,944-4,531 points) and 5,434 points (50% retracement of the decline from 6,338-4,531 points). Another interesting thing to note is that the tops since April 2011 have been roughly 14 weeks apart and we completed 14 weeks from the last top of 5,399 (28 October 2011). Also there is a 32 week bottom to top cycle prevailing and last week was also the 32nd week from the low of 24 June 2011. The next cyclical top as per this cycle falls in the end of March 2012, so it will be interesting to watch how the market behaves from hereon as it is now a desperate situation for the Bears to pull things back. Well, they must now be hoping that the trial court ruling on the then FM’s role in the 2G spectrum provides the trigger for a correction. The odds remain in favour of profit taking and shorting (only for the brave hearted). This week’s open will be determined as to what/if the trial court judge rules today.

(Vidur Pendharkar works as a Consultant Technical Analyst and Chief Strategist at www.trend4casting.com)
 

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