FII attitude may be key
The market eased down after hitting new 2009 highs. The Nifty hit an intra-day top of 5,181 before slipping to close the week at 4,997.05 points for a loss of 2.82 per cent. The Sensex lost 2.95 per cent to close at 16,810 points. The Defty was down 3.4 per cent with the dollar firming slightly against the rupee.
Breadth was poor and momentum indicators were mixed. Volumes remained reasonable but there was some drop in the cash segment’s activity. Advances were outnumbered by declines. The IT sector index actually gained 3.8 per cent but other key sectors dropped more than the market. The Midcaps were down 3 per cent and the BSE 500 was down 2.44 per cent. Both FIIs and DIIs were net sellers but not in large quantities.
Outlook: The market bounced from firm support between 4,950 and 5,000 several times. If that support holds, the intermediate uptrend would remain intact. If that support breaks, a slide till 4,750 is possible. Next week, settlement considerations would have a strong bearing on short-term direction. FIIs will play a key role.
Rationale: Carryover trends are good without being extra-bullish. FIIs have been sellers for the past two weeks – will they cover shorts or continue selling? The intermediate uptrend, which has been up 14 weeks, could see a final burst that pushes the Nifty till 5,300. Expect intra-day volatility to rise, regardless of direction.
Counterview: The intermediate trend must be close to maturity and if the Nifty closes below 4,900, it will signal a trend reversal. In that case, expect net losses through the November settlement and a drop till 4,750 before the next support is found. Momentum indicators are mixed and can be interpreted either way.
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Bulls & Bears: Many major stocks are mimicking the indices and bouncing from key supports. There is also a pattern of stock-specific churn with peers in the same sectors moving in different directions, presumably due to first half results and projections.
Looking at key sectors, IT is up and likely to stay that way if the dollar continues its recovery. Banks as a sector were down through the week but saw a recovery in the last session. It is difficult to say whether this was purely short-covering but some banks didn’t correct at all. Real estate has mixed signals – DLF looks strong but Unitech seems weak and Indiabulls Real Estate and HDIL have tested key supports.
Sugar which has been bullish throughout 2009 saw a surge towards the weekend. So did FMCGs such as Hindustan Unilever and ITC. Some healthcare and pharma majors like Dr Reddy’s, Jubilant and Piramal Healthcare also showed signs of spectacular revival in the last session.
MICRO TECHNICALS
YES BANK
Current Price: Rs 256.5
Target Price: NA
The stock established a high of Rs 262 last week and it looks likely to test that soon. Volumes remain excellent. The problem could be over-extension since it’s moved up almost vertically in the past three weeks. Also it is impossible to set a target. Keep a trailing stop at Rs 249 and go long. Move the stop up 5 units for every 5 unit move.
HIND UNILEVER
Current Price: Rs 280.5
Target Price: Rs 295
The stock hit strong resistance at Rs 295 and corrected down to a good support at Rs 270. It has started moving up again on slightly improved volumes. The pattern suggests range-trading will occur between Rs 270-295. Keep a stop at Rs 275 and go long. Start booking profits above Rs 293.
JUBILANT ORGANOSYS
Current Price: Rs 237.5
Target Price: Rs 250
The stock has seen massive volume expansion coinciding with a rise from a bottom around Rs 210. If the volume pattern is maintained it will certainly test Rs 250 levels intra-day, though there is a strong resistance there. Keep a stop at Rs 232 and go long. Cover at Rs 250.
CRANES SOFTWARE
Current Price: Rs 41.5
Target Price: Rs 48
The stock has seen strong institutional interest and bulk deals between Rs 38-41, leading to strong volume expansion. It has the potential to land somewhere between Rs 48-50, given the volume pattern. Keep a stop at Rs 39.5 and go long. Book profits above Rs 47.5.
SHREE RENUKA SUGARS
Current Price: Rs 214.45
Target Price: Rs 225
Sugar remains in a secular bull-run. Renuka Sugars has climbed over 300 per cent in the past 12 months, from Rs 50 levels. It saw another price breakout coupled to strong volumes last week. The new target would be around Rs 225. Keep a stop at Rs 207 and go long.