Momentum indicators are overbought and settlement could trigger profit-taking.
The market continued to rise inexorably. The Nifty was up 2.85 per cent closing at 3,480.85 points while the Sensex rose 2.78 per cent to close at 11,329 points. The Defty rose 2.89 per cent with the rupee staying below the $50 mark.
Breadth and volume signals remained strong. Advances outnumbered declines and smaller stocks outperformed pivotals. The Nifty Junior rose by over 5 per cent while the BSE 500 was up by over 3 per cent. Institutional attitude remained positive with both FIIs and domestic institutions being net buyers.
Outlook: The Nifty has crossed its own 200 DMA, which is a strongly positive technical signal. It’s testing resistance at around the 3,500-level. If it closes above 3,500, the next target should be 3,650. However, the market is overbought and profit-booking may occur due to settlement considerations.
Rationale: The uptrend of the past seven weeks has been strong enough to break several resistances on enhanced volumes and log gains of over 30 per cent. This could be the beginning of a new bull market especially due to the breakout past the 200 DMA.
However, momentum indicators are overbought and settlement could trigger profit-taking. On the downside, there’s support at 3,350, 3,250 and below, at 3,100.
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A fall below 3,250 would threaten the intermediate trend.
Counter-view: Mid-May, the general elections will be over and the shape of the next Lok Sabha will be known. If there is a hung parliament, the market will crash. In that case, 2,800 is a likely bottom. In technical terms, it would be read as a 30-35 per cent rise (1,000-1,100 points), followed by a 65-70 per cent retracement of the move (700-800 points).
Bulls and Bears: The CNXIT index jumped 4.6 per cent and the rupee showed some weakness on Friday. The BankNifty underperformed the overall market, though it registered gains. The real estate industry continues to make a recovery with HDIL and Unitech doing well.
A fair number of infrastructure stocks such as IVRCL, Punj Lloyd , Adani, Mundra, GMR Infra, JP Associates, etc gained or showed promising pricelines. But in most cases, movements were stock-specific rather than industry-specific. M&M, for example, outperformed the auto industry while Wipro did better than most IT scrips and Airtel surged.
MICRO TECHNICALS
Bharti Airtel
Current Price: Rs 750
Target Price: Rs 800
The stock has seen a steady rise backed by reasonable volumes over the past six weeks. It made a key breakout when it closed above Rs 740. The target could be around Rs 800. Keep a stop at Rs 740 and go long. Start booking profits at above Rs 790. HDIL
Current Price: Rs 154
Target Price: Rs 170
The stock has risen past strong resistance at Rs 145-150 and done so on high volumes. It has a target of about Rs 170 and may move a little further given excellent volume action. Keep a stop at Rs 149 and go long.
Mahindra & Mahindra
Current Price: Rs 471
Target Price: Rs 510
The stock is testing resistance above the current level. If it closes above Rs 480, it has a target of Rs Rs 510. Keep a stop at Rs 465 and go long. Book profits above Rs 505. Watch for high intra-day volatility – there could be lows at Rs 445. If the stop at Rs 465 is broken, go short.
RIL
Current Price: Rs 1,789
Target Price: Rs 1,675
The stock has reacted down till intra-day lows of Rs 1,690 in several successive sessions. On the upside, it’s running into resistance above Rs 1,800. If there's profit-taking before settlement, it will have intra-day downsides till around the Rs 1,675 mark. Keep a stop at Rs 1,800 and go short.
Wipro
Current Price: Rs 312
Target Price: Rs 295
The stock has seen a sharp rise on strong volume action. However it is hitting powerful resistance and it performed a bearish double-top in the past two sessions. There could be a downside till around Rs 295 on a sell off. Keep a stop at Rs 315 and go short.