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Markets appear mildly bullish

MACRO TECHNICALS

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Devangshu Datta New Delhi
Last Updated : Feb 26 2013 | 12:24 AM IST
The Nifty is likely to trade between 4000 and 4350 points till the Budget.
 
The market saw little apparent change this week but the mood was mildly bullish. The Sensex hit a new high and closed up by 0.85 per cent at 14,403.77 points.
 
The Nifty was up 0.86 per cent at 4183.5 and also touched new highs. The Defty gained 1.11 per cent as the rupee hardened after the RBI hiked a policy rate.
 
Breadth signals were balanced. The broad-based BSE 500 gained 0.71 per cent. Advances and declines approximately matched each other. The Bank Nifty dropped 0.52 per cent after the rate hike. The CNX IT also lost a little ground (0.11 per cent down).
 
Outlook: By definition a market that is reaching new highs must be bullish and the chart formations back that. We can compute a target of about 4250 for the Nifty on price formation alone and volumes gained enough on Friday for that to be reasonably achievable.
 
However, momentum signals have not backed the price move solidly. I think the market will register mild gains until Budget week.
 
Rationale: Volumes have been reasonable and the price formations are also bullish. Momentum and breadth signals have not been bearish but they have not been as strong as one would want in a market trading at record levels.
 
The institutional attitude seems to suggest fence-sitting or bearishness by both FIs and FIIs. Traders are likely to stay long. The trigger in either direction will probably be the impending Budget. Until then, the Nifty is likely to stay inside a narrow range of 4000-4350.
 
Counter-view: The Budget is likely to be a defining moment. It tends to be bearish in its impact more often than not. Be prepared for a big move post-Budget. It's difficult to predict the direction because technical analysis reflects market expectation and the market isn't necessarily great at second-guessing the mind of a specific person, in this case, the FM.
 
Bulls & bears: Two important sectors are mildly bearish. Banks have been hit by the rate hike and the requirement for higher provision and there has been a sell-off - UTI Bank could outperform however. IT has been hit by the rupee hardening that has occurred due to the rate hike though Satyam may buck the trend in a technical recovery.
 
In the rest of the market, movements appeared stock specific except for bullishness across the telecom space. Bharti Airtel, Reliance Communication, VSNL and Tata Tele all looked strong. Jet Airways led a small recovery.
 
Apart from that, investment was scattered across Larsen, HDFC, Reliance Energy, Suzlon, Moser Baer, Mphasis and Nirma. The Corus buyout has been viewed negatively but Tata Steel appears to have hit reliable support
 
MICRO TECHNICALS
 
Bharti Airtel
Current Price: 770.6
Target Price: NA
 
The stock is in the middle of a strong bull run which is backed by excellent volume expansion. It's not possible to compute a target for this sort of formation. Keep a trailing stop loss at 735 and move it up 10 points per 15 point move. Try to convert to a delivery position with a 10 session perspective.
 
Larsen & Toubro
Current Price: 1680.3
Target Price: 1710
 
The stock has jumped out of a trading range. It has a short-term target of about 1710 and it could go further. Keep a trailing stop at 1655. Move the stop up 10 points for every 10 point move. Book only partial profits at 1710 and consider converting to a delivery position with a 15 session perspective.
 
Suzlon Energy
Current Price: 1219.35
Target Price:
 
The stock seems to be making V-shaped recovery from lows of around 1125. It's likely to rise till at least the 1285 level before it hits strong resistance. Keep a stop at 1205 and go long. Book partial profits above 1255.
 
Tata Steel
Current Price: 462.65
Target Price: 450-485 Range
 
The stock dropped from 535 levels to 450 once the deal came through. It seems to have found support but its still generating high volumes. It's likely to range trade between 450-485 with an indeterminate trend. If either 450 or 485 is broken, a new valid trend will be established. Stay out until such a time or buy near the low end of the zone and sell at the upper end.
 
UTI Bank
Current Price: 587.75
Target Price: 610
 
The stock made a strong breakout from 555. It has a target of 610 and that may be achieved due to good volume expansion. Keep a stop at 575 and go long. Book partial profits above 600. Be prepared for large intra-day swings.
 
(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)

 

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First Published: Feb 05 2007 | 12:00 AM IST

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