The market could run up till 4,450 or 4,500 before it hits serious resistance.
A very low-key settlement was followed by a sharp upturn on Friday. After bottoming at 4,201 points, the Nifty moved up to close at 4,360 for a nominal gain of 0.75 per cent. The Sensex gained 1.13 per cent to close at 14,564 points. The Defty was down 0.08 per cent as the rupee slid to 43.8.
Breadth signals were neutral with advances slightly ahead of declines. Volumes were very low especially for a settlement. The FIIs and domestic institutions barely participated in the last week. For what its worth, their stances were almost neutral in the first four sessions with sales nearly matching buys. The Junior rose 2.61 per cent and the BSE 500 was up 1.09 per cent.
Outlook: The intermediate uptrend may still be alive. The short-term trend is up. The market could run up till around 4,450 or even 4,500 before it hits serious resistance. However, sustaining an uptrend will be difficult without the participation of institutions.
Rationale: The pattern of higher tops and bottoms continued with the 4,201 turnaround on Thursday. Hence, the intermediate trend could still be alive. There is resistance immediately above current Nifty levels but it is liable to be cleared. Above 4,450, the market will hit very stiff resistance and that cannot be overcome without major buying from institutions.
Counter-view: The lack of volume is worrying. This is usually a signal of an impending downtrend and the intermediate uptrend has now lasted around 7 weeks so that is a distinct possibility. If the market does drop below 4,300, it is liable to test the support at 4,200 all over again.
Bulls & bears: A big bounce from the banking sector and a smaller bounce from IT propelled the market up on Friday. The Bank Nifty climbed 5.65 per cent last week while the CNXIT rose 2.5 per cent.
More From This Section
This was on the back of better-than-expected inflation data and a falling rupee. The PSU Banks such as Bank of Baroda, Bank of India, Canara Bank, Corporation Bank, Oriental Bank and PNB contributed more to the rally than the private banks. NBFCs and FIs such as Reliance Capital, IDFC and IDBI also rose.
In the IT sector, stocks such as EduComp and Moser appeared more interesting than the biggies though Infosys and Satyam also contributed to the rally.
Sugar stocks, which plummeted during the week, could see a rally in the early part of next week. Apart from these, winners and losers were scattered at random across industry segments.
MICRO TECHNICALS
Balrampur Chini
Current Price: Rs 92.35
Target Price: Rs 98
The stock could recover till around the Rs 98 level next week if the rally that started on Friday continues. It has made a sharp pullback from around the Rs 86-level. Keep a stop at Rs 90 and go long. Start booking profits above Rs 96.
EduComp
Current Price: Rs 3,770
Target Price: Rs 4,100
The stock has seen a rise from Rs 3,275 levels in the past five sessions and this has been backed by very strong volume action. At Rs 3,600, it completed a bullish pattern with a potential target of Rs 4,100. It will run into resistance at Rs 4,000. Keep a stop at Rs 3,700 and go long.
Great Offshore
Current Price: Rs 530.75
Target Price: Rs 580
A rise from Rs 460 has been driven by very strong volumes. At Rs 490, the stock completed a bullish pattern with an initial target of Rs 540 that has almost been achieved. It has the potential to rise till around the Rs 580 mark where it will be hit by massive resistance. Keep a stop at Rs 520 and go long.
Punj Lloyd
Current Price: Rs 301.15
Target Price: Rs 335
The stock has almost completed a bullish formation and it is showing promising volume expansion. If it closes above Rs 305, it would have the potential to move till Rs 335-340. Keep a stop at Rs 295 and go long. Add to the position if it clears Rs 305.
(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)