18^th January, 2000.

Our first supplement on the infotech sector was very well timed as the NASDAQ started reacting from the same day. Our local IT stocks too have undergone a painful fortnight where many of them have shed between 20 – 30 percent from their peak levels.

Since this exercise is proving useful, let us review the action of the NASDAQ over the last fortnight. It touched an all time high of 4190 on 3^rd January, 2000 and has since been reacting. It touched a low of 3710 , a drop of 11%, on 6-01-2000. There has been a gradual upper movement ever since. Towards the close on Friday, 14-01-2000, the NASDAQ has recouped most of it losses by closing at 4064.

In Elliott wave terms, the third wave of the third, that took off from 2688 (19-10-99) could be complete. This, as we mentioned before is the most profitable part of the rally. But the rally from 1419 (30-10-98) has still some way to go. We can expect movement in the upper range between 3500 and 5000 for a few months (at least) as the entire move from 1419 completes itself.

For the next two weeks, the NASDAQ can behave thus,

a) The former all time high of 4190 is near. If the NASDAQ reacts before crossing above this level, another fall to 3600 - 3364 can take place.

b) If the rally from 3710 crosses the 4190 barrier effectively, it can face resistance around the 4400 zone.

The connotations for the Indian investor are that, the spectacular, vertical rise could be over but the good quality stocks in the this sector will move in a broad upper range. There is a possibility of some of these stocks rising to new highs.

The third wave alone has the breadth and the power to take the all the stocks up, deserving or undeserving. That is, all the IT stocks might not participate in the next rise. The interest rate-hike fears are still alive in the US and this might hinder any rally there. We hope, the long term picture will be much clearer in our next issue.

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