Nifty resistance between 4150-4250

MACRO TECHNICALS

The major indices could test the lows of Wednesday again.

A massive crash on Monday was followed by a sharp but incomplete recovery on Thursday. The Sensex eventually closed down by 1.26 per cent at 14355.55 points after hitting a low of 13805.

The Nifty was down 0.98 per cent at 4146 bouncing from a low of 3965. The Defty was down marginally less at minus 0.95 per cent.

Breadth swung dramatically. On Monday almost everything lost ground, while there was an across-the-board recovery on Thursday.

However, most stocks were in the red week-on-week. The BSE 500 ended down 1.78 per cent. The worst affected was the Bank Nifty which lost 5.54 per cent.

The CNX IT actually gained 1.9 per cent however "� the relatively better performance of the Nifty versus Sensex was because of its higher IT component. The FIIs were net buyers through the week but the Indian mutual funds were equally steady sellers. Through the four sessions, volumes stayed high.

Outlook: The major indices could test the lows of Wednesday again. As of now, we would have to assume that the trend is down. There is resistance between 4150-4250, which will be difficult to cross. Daily volatility spiked and is liable to remain high going into the Budget session.

Rationale: The indices broke several major supports last week and even the dramatic reversal on Thursday wasn't enough to stave off net losses.

The support at 3950 held but a pattern of lower lows and lower highs was established. The 3950 support is likely to be tested again but one would only be seriously worried if it is broken. The Nifty put-call ratio option ratio was at an overbought level.

Counter-view: Traditionally, the pre-Budget period tends to be strong. Given that FIs seem to be maintaining a bullish posture the key to the next fortnight's movements will be mutual fund attitude. If they go positive, the market will rise. The technical signals could change in a flash.

Bulls & bears: As mentioned above, banks did badly while IT did well. Most other stocks lost some ground at least. The recurrent pattern was a "V" where the recovery was less than the loss.

The telecom industry seems to have adjusted to the Hutch deal and Airtel, MTNL and Reliance Communications recovered ground after dropping the week before.

Among IT stocks, HCL Tech, Infosys and Wipro looked especially strong. Bullishness outside these sectors was stock-specific with Dabur, Dr Reddy's, Hero Honda, IPCL, Reliance Industries and Punjab Tractors all being backed by bulls on Thursday.

MICRO TECHNICALS

Bharti Airtel
Current Price: 793
Target Price: 805

After reacting with a drop to the Vodaphone deal, the stock has rebounded strongly on decent volumes. It broke out to a new high on Thursday. It's difficult to make target projections.

The minimalists would suggest a top at 805, while the optimists would say that 835 is likely. Keep a stop at 780 and go long.

Hindalco
Current Price: 151.6
Target Price: 140-170 Range-trading

The response to the Novelis deal was a massive sell-off. The stock dropped from 174 to 137 levels. It has since recovered. The likely pattern into the next six-eight weeks is range-trading between the reasonably wide range of 140-170. Accumulate below 145 and book profits above 165.

Punjab Tractors
Current Price: 342
Target Price: 390

There have been strong volumes and rising prices as the stock becomes a takeover target. It is testing intra-day resistance at the 349-350 level. It if closes above 350, it has the potential to hit the 390 mark. The intra-day range is likely to be wide and price volatility is going to be high. Keep a stop at 335 and go long.

Reliance Industries
Current Price: 1406.95
Target Price: 1435, 1465

Along with other refiner/petrochem players RIL has seen a recovery. The stock has pulled to the top of a trading range and looks poised for a breakout. It may actually have broken out but the move is unconfirmed.

The minimum upside is 1435 but that could be intra-day. If RIL closes above 1435, it will move till 1465. Keep a stop at 1395 and go long.

Wipro
Current Price: 677
Target Price: 690, 720

The stock has made a breakout from a trading range on high volume. It has a minimum target of 690 and it could move further till around the 720 level. Keep a stop at 650 and go long. There is likely to be high intra-day volatility.

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