| The market broke on Wednesday and it may have dipped into a significant downtrend. The Nifty closed at 4145 points, down 3.54 per cent while the Defty closed down 5 per cent as the rupee finally lost a little ground. The Sensex was down 3.48 per cent at 14063.81 points. The CNX-IT index was the only sectorial gainer rising 1.3 per cent on the back of rupee depreciation. |
| Breadth was poor by the weekend. Declines outnumbered on the last three sessions. Volumes increased on the downturn "� a danger signal since it suggest supply due to panic selling. The BSE500 lost 3.16 per cent. |
| The FIIs were seller through the latter part of the week and, while data is unavailable for mutuals beyond the June 6, anecdotal evidence suggests that they too were sellers in the last two sessions. |
| Outlook: The market busted an important support at 4175, the next support is at 4125. If that breaks, the Nifty could drop till 4050. This is not unlikely, given poor breadth. If 4050 does not hold, there could be a considerable fall. |
| Rationale: There is a chance that the intermediate trend has reversed down. After rising off a base at 3600-odd in early April, the market was unable to break through resistance above 4300. After range-trading for a fortnight, it has broken downwards. In terms of time duration, this makes sense. |
| Intermediate trends generally last between 6-12 weeks and this one appears to have matured in week 8-9. If the intermediate trend has broken, there could be a downside till 3850 at the least and we could see lower prices over the next 2 months. |
| Counter-view: Through the last two years, we've seen a pattern of a short correction followed by another surge. If this happens again, the market might bounce very quickly from 3850 levels rather than meander down over a longer period of time. |
| Bulls & Bears: IT stocks showed strength as the rupee dipped. Satyam and TCS were key to holding up the market but the sector may be unable to sustain gains, given that Wall Street analysts have become jittery about the long-term effect of a generally strong rupee. |
| Cement, two-wheeler and auto stocks were among the biggest losers. Banking was another sector which took a hammering. So did refiners though Reliance outperformed the PSUs. (Maruti) Among other stocks too, the trend was generally weak. The DLF mega-issue could also have a temporary dampening effect next week as it will suck out liquidity. |
| MICRO TECHNICALS |
| Maruti Current Price: 737.55 Target price: 710 |
| The stock broke a key support at 748 on a volume expansion. It has a downside target of 710. Keep a stop at 749 and go short. Book profits below 715. The long-term trend suggest that 710 may be exceeded and the stock could bottom at 670 in a 5-week timeframe. |
| GMR Current Price: 508.25 Target price: 540 |
| The stock saw a jump on high volumes on Friday. It is testing resistance at 510 "� if it closes above that level, GMR will have an upside till the 540 level. Keep a stop at 499 and go long. Book partial profits above 516 because it may take a couple of session to close above that level. |
| Hindalco Current Price: 157.8 Target price: 169 |
| The stock has gained on excellent volumes in the past five sessions. It has a potential target of 169 where it hit massive resistance. Keep a stop at 153 and go long. |
| Praj Industries Current Price: 523 Target price: 550 |
| The stock has made an upside breakout on high volumes. It has a minimum upside of 530 and a likely upside of 550-plus. Go long with a stop at 510 and consider averaging up or booking only partial profits if it closes above 530. |
| Satyam Current Price: 493.55 Target price: 460, 513 |
| Satyam has spurted on high volumes in defiance of the general market trend in the last two sessions. However it has been unable to hold onto gains above 494, which seems to be a major resistance. A close above 495 would set up a target of 515 while a close below 488 could lead to a drop till 460 levels. So it is in a narrow pivot zone. Traders could short if it opens below 488 on Monday with a stop at 494. If it opens above 495, go long with a stop at 488. |
| (The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.) |
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