While an upside breakout seems against the odds, the second bailout package could change that situation.
The new year has begun on a positive note. The Nifty closed at 3,046 points for a net gain of 6.6 per cent. The Sensex was up 6.75 per cent at 9,958 points. The Defty rose only 5.76 per cent, however, as the rupee declined.
Both FIIs and domestic institutions were net buyers in the past couple of sessions. The advances to declines ratio was quite positive but volumes remained low to moderate. The BSE 500 was up 7.4 per cent while the Midcaps 50 rose an amazing 10.6 per cent.
Outlook: The short-term trend is clearly positive. The target would be around 3,240. That level is critical. If it crosses 3,240, the intermediate trend will be confirmed as positive. If it falls below that level again, the intermediate trend will be range-trading. Given the low volumes, an upside breakout seems against the odds but the second bailout package could change that situation.
Rationale: If the market crosses 3,240, it could set up a target of around 3,600. If it stops below 3,240, the Nifty will probably trade through the range of 2,900-3,200 before finding a direction. Rate cuts may make a difference.
Counter-view: The trend is deceptive because many big players have not yet decided on their Q4 and 2009 strategies. That’s indicated by lack of volumes. Once the big players come back into action, we could see a pick up. By and large, the immediate future seems to be positive.
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Bulls & Bears: While most sectors went up, the Bank Nifty was a clear winner rising almost 9 per cent. The Junior and Midcaps both shot up by over 10 per cent. Banks are likely to continue the upsurge and so are rate sensitive sectors. Real estate could be a winner – Unitech, HDIL, Purvankara and DLF all look good. Housing finance is another obvious target with HDFC and LIC Housing in the limelight. Engineering and construction scrips like GMR Infra, HCC and Nagarjuna Construction also attracted interest. So did fertiliser stocks such as Nagarjuna Fertiliser
MICRO TECHNICALS
ABB
Current Price: Rs 490
Target Price: Rs 520
The stock made a breakout when it went past Rs 480 on high volumes. The projected target could be around Rs 520. Keep a stop at Rs 480 and go long. There is a big resistance just above Rs 490, so you may get a chance to accumulate.
GMR Infra
Current Price: Rs 85
Target Price: Rs 95
The stock cleared a strong resistance at Rs 80 and completed a bullish formation. There’s a target of around Rs 95 with resistance starting above Rs 90. Keep a stop at Rs 80 and go long. Book partial profits at Rs 90.
Corporation Bank
Current Price: Rs 196
Target Price: Rs 215
Corp Bank is among the scrips that has responded quite favourably to the prospect of rate cuts. Volumes shot up. If it closes above Rs 200, there is a target of Rs 215-220. Keep a stop at Rs 190 and go long.
Nagarjuna Fertiliser
Current Price: Rs 18
Target Price: Rs 26
A huge volume expansion has accompanied the completion of a bullish formation. The target could be in the range of Rs 26. Keep a stop at Rs 15.5 and go long. Book partial profits above Rs 21.5.
PTC
Current Price: Rs 73.5
Target Price: Rs 78
The stock made a breakout past resistance at Rs 71 on moderate volumes. There is a possible upside till the Rs 78 level and maybe till Rs 80 if volumes improve. Keep a stop at Rs 70 and go long. Book profits above Rs 78.