Market to range-trade

MACRO TECHNICALS

The market is likely to trade between 3725-3925 points. There will be selling pressure because of the rate hike, but the support at 3725-3750 is likely to hold.

The market coped well enough with the settlement although there was high daily volatility. It only ended marginally down.

The Sensex closed at 13072.1 points for a loss of 1.61 per cent. The Nifty was down 1.02 per cent at the Friday close of 3821.55. The Defty lost 0.80 per cent because the rupee has hardened significantly.

Breadth was quite positive despite losses in most large caps. Volumes were good though not exceptional. The Bank Nifty dipped by 3.8 per cent week-on-week and it is likely to have a further downside next week due to the surprise rate hike by the RBI.

The BSE-500 was down 1.17 per cent and the CNX IT lost 3.52 per cent. The FIIs were net buyers while the mutual funds continued to sell.

Outlook: The market is likely to trade between 3725-3925 points. There will be selling pressure because of the rate hike. But the support at 3725-3750 is likely to hold. The long-term signals are reasonably positive.

Rationale: The intermediate downtrend that started on February 9 appears to have petered out. We have seen higher bottoms at 3550 and then 3575. The support has come along the 200-day moving average, which suggests that the long-term trend remains okay.

Counter-view: Liquidity will be at a premium for another couple of weeks as the banking system adjusts to the new rate hike. Interest rates are likely to rise. That is almost always inversely correlated with stock prices.

Results season is also upon us "� if Q4 and full year results beat high expectations that would be a positive driver. If results are below par, the market will fall.

Bulls & bears: When one examines individual stocks, it becomes obvious that pharma and healthcare stocks are on a roll. Aurobindo Pharma, Biocon, Dr Reddy's, Ranbaxy and Sun Pharma are all looking bullish.

Apart from these, there appears to be enough interest in FMCGs such as Dabur, HLL and ITC as these stocks are displaying strong volumes and good price lines.

ONGC, SAIL and NTPC are three other big guns with strong prices. Among financial stocks, IFCI and Kotak bucked the trend by moving up. Other banks also didn't do terribly badly.

The rate hike may have been anticipated at some levels "� we'll know when it starts being factored into prices this week.

What is most interesting is that quite a few pivotal stocks have developed price lines that project to targets that are the equivalent of new highs.

MICRO TECHNICALS

Biocon
Current Price: 486.2
Target Price: 465, 490

The stock is testing the top of a range of 465-490 on significantly expanded volume. If it closes above 490, it would have a projected short-term target of 515 and a medium-term target of 560 (achievable in about 10 weeks). However there is also a downside till about the 465 level.

The best method may be to accumulate a delivery position every time the stock is below the 475 mark. Keep a stop at 465. If the stock does close above 490, go long with a stop at 485.

HLL
Current Price: 205.2
Target Price: 235

Hindustan Lever is generating huge volumes but the price hasn't moved that much. It faces strong resistance at 209-210. If it closes above 210, the stock will have a target of about 235. Keep a stop at 200 and accumulate.

NTPC
Current Price: 150.25
Target Price: 160, 170

The stock has risen on higher volumes. It has a potential target of 170 and a likely target of 160. Keep a stop at 144 and go long. Book only partial profits above the 158 mark because there is a pretty good chance that the 170 target will be achieved at least on intra-day basis.

ONGC
Current Price: 880.8
Target Price: NA

ONGC has seen a sharp climb from 760 levels. It is generating decent volumes. It has a potential target of 940 but it faces massive resistance at 890-915. Keep a stop at 875 and go long.

Book partial profits at 890 levels. That may be a stern resistance for several sessions in succession.

SAIL
Current Price: 113
Target Price: 125

The stock has risen promisingly albeit on lower volumes. It has a likely target of 125. Keep a stop at 108 and go long. Above 120, SAIL would be in new territory and that makes it tempting to suggest holding a delivery position with a trailing stop-loss, initially set at 120.

(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)