| On Friday, the Sensex closed on 4769.99 points, showing a week-on-week loss of 1.29 per cent. The Nifty had a corresponding loss of 1.14 per cent at its close of 1491.2. |
| The Defty lost considerably more, dropping 2.06 per cent as the dollar strengthened against the rupee. Breadth signals were negative and indicative of low trading interest. Volumes have consistently low and dipping lower through June. |
| Declines outnumbered advances and the Nifty put-call ratio was quite oversold at around the 0.58 level. The broad BSE 500 was down 1.73 per cent. |
| Outlook: The market is likely to continue range-trading until the Budget. Any breakouts are likely to be on the downside. In the immediate future, there is likely to be a small pull-back early this week. |
| Major indices are testing critical supports around Sensex 4750-4800 and Nifty 1475-1500 respectively. If those supports break, the market could drop. |
| However, it seems likely that these supports will hold until the Budget. The medium-term trend (which includes post-Budget trading) could be bearish. |
| Rationale: This sort of narrowing triangle or wedge is generally a continuation pattern, with the exceptions being the ones where there is a breakout before two-thirds of the projected formation is complete. |
| This formation is almost complete. We would expect the market to continue trading downwards after it has completed the triangle/wedge pattern. The breadth signals also indicate a continuation of the downtrend. |
| Counter-view: The Budget is always a watershed for the Indian market. If it produces a pleasant surprise, the entire pattern of trading could change. |
| This doesn't happen often but it is certainly a possibility. The low volumes through this month could change dramatically if the Budget makes FIIs and big operators enthusiastic. |
| Bulls and bears: The lack of volumes and trading interest has left many shares immobile. Very few stocks look as though they could perform counter to the overall market trend. |
| Cement and construction stocks like ACC, Jaiprakash, Grasim, L&T seem to be in the middle of a sell-off and the power sector stocks like Tata Power and Reliance Energy are also under apparent pressure. |
| There is no sector that seems capable of strong outperformance though IT scrips could provide a hedge given the stronger dollar. Potential bull performers over the next week include Asian Paints, Atlas Copco, Bank of Baroda, Bhel, Infosys and Mastek. |
| MICRO TECHNICALS |
| INFOSYS Current price: 5265 Target price: 5375 |
| The stock has moved up over the last week even as the market has moved down. It showed reasonable volumes to back the price trend. |
| There is a strong resistance at around 5375-5400 and the upmove should stop there. |
| However, if the stock closes above 5400, it could move up until the 5800 mark. Go long, keep a stop at 5125 and be prepared to book some profits above 5350. |
| ASIAN PAINTS Current price: 304.55 Target price: 330 |
| The scrip has moved up against the market trend. It is testing resistance at the 305 level. If it closes above 310, it will have a potential target of around 330. |
| However, there has been a lot of previous trading between 305-320 and this could prove to be a strong resistance. It seems worth buying only with a long-term perspective and as a potential hedge. Keep a stop at 290. |
| APOLLO HOSPITALS Current price: 207 Target price: 220 |
| The stock seems to be trading inside the range of 200-210 with a strong resistance at about 220. It appears to have a bullish long-term trend and, if it breaks out above 220, it could go a long way. |
| Unfortunately the pattern is not conducive to projections. It may be worth buying for the long-term with a stop at around 200. |
| BHEL Current price: 488 Target price: NA |
| The stock moved from 100 in October 2000 to highs of 635 in April 2004. It has since reacted to the 375 levels and then recovered. |
| This move of 535 up followed by 260 appears to be a close fit to the classic Fibonacci retracement pattern with a retracement till around the 50 per cent mark followed by a consolidation at the 31.8 per cent (465) level. |
| It is currently testing resistance at 490 and an upmove could carry it to 530. Go long with a stop at 465. |
| UTI BANK Current price: 118.7 Target price: 122, 135 |
| The stock seems to be seeing selective investment at around the current levels. There is a strong resistance at about 120-125. If the stock breaks that resistance, it could move until the 135 level. |
| There is good support at about 113. Keep a stop at around 112 and go long. |
| (The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.) |
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