The July settlement ended with a breakout that kept the Nifty on target for a rise till the 4,900 level. The Nifty closed on Friday at 4,636 points for a gain of 1.5 per cent. The Sensex was up 1.9 per cent week-on-week, closing at 15,670. The Defty gained 1.8 per cent as the rupee strengthened.
FIIs and DIIs were net buyers. Advances comfortably outran declines. Volumes were excellent with expansions in both cash and F&O. The BSE 500 was ahead by 2 per cent and the Bank Nifty, Midcaps-50 both outperformed the major indices. The standout return came from the CNXIT which rose by 6 per cent.
Outlook: Chart formations and the backing volumes suggest that the market has the legs to touch targets in the 4,850-4,900 range. There is resistance at current levels and up until the 4,700 zone, however. The apparent uptrend will only be confirmed by a crossing of the 4,693 level and a close above that level.
Rationale: We have seen a pattern of rising peaks and troughs since mid-July when the market bottomed at 3,918. The 2009 high is 4,693 which must be beaten to confirm this uptrend. The strong volumes and concerted institutional support make this likely. Volatility is likely to rise with the breakout.
Counter-view: The market could get stuck in a consolidation pattern between 4,450-4,700 for an indeterminate period since there is a pattern of previous heavy trading in that range. A drop below 4,450 would suggest an intermediate trend reversal.
Bulls & bears: Trading is likely to get more stock-specific as the June quarter results are disseminated and absorbed. Banks picked up after the RBI policy review maintained status quo; private banks continue perform better in technical terms. IT has seen a re-rating with large, mid-sized and small counters being backed by serious buying.
Real estate plays surged but the effect was more pronounced in smaller counters.
The metals sector continued to generate a lot of trading interest but the trend was difficult to decipher. The engineering and construction sector looks set for an upmove. There also appears to be some interest reviving in pharma with counters like Lupin and Aurobindo seeing backers.
MICRO TECHNICALS
HINDALCO
Current Price: Rs 100.3
Target Price: Rs 112
The stock has cleared resistance in the mid 90s on the back of rising volume. It has a potential target of Rs 112 with some resistance visible at Rs 101-102. Keep a stop at Rs 98 and go long. Add to the position when it closes above Rs 103. Book profits above the Rs 111 level.
AUROBINDO PHARMA
Current Price: Rs 590.2
Target Price: NA
The stock has shot up from a base at around Rs 545. It is difficult to project a target since it is in a new zone for 2009. Keep a trailing stop at Rs 580 and go long. Move the stop up by 10 points for every 15-point move.
Book some profits at Rs 650 if that price is reached.
PATNI COMPUTER
Current Price: Rs 361.7
Target Price: NA The stock has shot up from Rs 293 to Rs 360 plus in the last two sessions on strong institutional buying. Quite impossible to set targets with a nearly vertical trendline. Set a trailing stop at Rs 355 and go long. Raise the stop 15 points for every 15 point rise.
If the stop is broken at Rs 355 (not higher), go short with a target of Rs 325.
FINANCIAL TECHNOLOGIES
Current Price: Rs 1,412
Target Price: Rs 1,510
Strong volumes are backing a price rise from a recent bottom in the Rs 1.330 zone. There is resistance at Rs 1,445- Rs 1,455 but if that is overcome a target in the range of Rs 1,510- Rs 1,520 should be reached. Keep a stop at Rs 1,390 and go long. Increase the position if the stock closes above Rs 1,455.
RELIANCE POWER
Current Price: Rs 169
Target Price: Rs 178
The stock is at a key support.
If it consolidates and moves up, it has a minimum target of Rs 178 and a likely upside till Rs 185. If it closes below Rs 165, it is likely to drop till the Rs 155 level. A bounce seems slightly more likely. Keep a stop at Rs 165 and go long. Book 75 per cent profit at Rs 178. If the Rs 165 stop is broken, go short with a target of Rs 155 and a stop at Rs 167.