Trading between 4,450-4,750

Anticipation of a good Budget could keep things buzzing till settlement.

The market hit a peak of Nifty 4,680 before reacting back to the previous week's levels. The Nifty closed at 4,583 points, which was nominally less than its closing values (4,587) of June 5. The Sensex gained around 0.9 per cent while the Nifty Junior gained 0.4 per cent. The Defty lost 1 per cent as the rupee dropped 0.7 per cent.

Domestic institutions were net sellers to the tune of about Rs 120 crore while FIIs bought a net Rs 2,950 crore. A lot of traders and operators also booked profits at higher levels. Declines outnumbered advances and the BSE 500 was down 0.6 per cent.

Outlook: Expect high intra-day volatility – every session is likely to see a high-low Nifty range of 100-150 points. The market is most likely to continue range-trading between 4,450-4,750. If it closes above 4,750, a target in the range of 4,900 is projected. A close below 4,450 will mean a drop till 4,300.

Rationale: The intermediate uptrend that started in early March is the first wave of a new bull market. That's why it has lasted so long (12 weeks of gains and 90 per cent up since March 6, when it hit a low of 2,539). Anticipations of a good Budget could keep things buzzing till settlement (June 25) and maybe even into early July. But there will be increasing profit-taking and volatility.

Counter-view: First waves in a bull market can beat the odds in terms of both time and price extension. An optimist might hope for a projection above 5,000. Equally, a pessimist could calculate a Fibonacci retraction that pulled the market till around 3,900 in a correction over the next 6-10 weeks. The market's response to the Budget is most likely to provide direction.

Bulls & bears: The IT sector has outperformed the market through the past three weeks. Satyam-Tech Mahindra have been the drivers. The Bank Nifty has underperformed, which is quite unusual. But bank stocks now seem to be consolidating on strong supports and private banks such as Axis, ICICI and Yes could bounce next week if there are rate cuts. Metals have had a terrific run but iron/steel stocks are reacting except for Sesa Goa. Sterlite and Hindalco look more bullish than ferrous producers.

Power, engineering and construction scrips such as NTPC, GMR, L&T and PTC could attract speculative bullish interest. There's some action happening in the sugar sector where stocks like Triveni, Bajaj Hindustan, Renuka and Balrampur are generating high volumes. Real estate counters are in the middle of a sharp reaction.

MICRO TECHNICALS

L&T
Current Price: Rs 1,612.00
Target Price: Rs 1,700.00

 

The stock has climbed past key resistance at Rs 1,575- Rs 1,600 and it should have a minimum target of about Rs 1,700 and a possible maximum of Rs 1,775. In fact it has already tested the Rs 1,700 level and is likely to test it again. Keep a stop at Rs 1,600 and go long. Book at least 50 per cent profits at Rs 1,700.

NOIDA TOLL
Current Price: Rs 46.80 
Target Price: Rs 60.00

The stock has seen massive volume expansion coupled to a price upmove. It has crossed one important resistance at Rs 44 and faces another one at Rs 49- Rs 50. If it can overcome Rs 49, it has a target of Rs 60. Keep a stop at Rs 43, go long. Increase the position above Rs 49.

ICICI Bank
Current Price: Rs 742.00
Target Price: Rs 850.00

 

The stock has been consolidating between Rs 715-Rs 760. There’s strong resistance at Rs 760. If that is beaten, the stock could have an upside till around the Rs 875 level. Keep a stop at Rs 735 and go long. Increase the position when ICICI closes above Rs 760. 

SAIL
Current Price: Rs 170.00
Target Price: Rs 155.00

 

The stock has reacted from Rs 180-plus on heavy selling. It has support at current levels but if that is broken, the stock could fall till around the Rs 155 level before it hits the next reliable support. Keep a stop at Rs 174 and go short. Cover below Rs 160. 

UNITECH
Current Price: Rs 86.50
Target Price: Rs 76.00

 

The stock hit strong resistance at around the Rs 100-mark and it has reacted to support at about Rs 84. If it closes below Rs 84, the stock could decline till around Rs 75. Keep a stop at Rs 90 and go short. Increase the position below Rs 84 and clear it at Rs 76.