| A truncated week began with a massive fall on Monday and ended with a weak recovery on Wednesday. |
| The Nifty ended the week at 4,573.95 points, down by 4.14 per cent, while the Sensex was down by 4.86 per cent at 14,904 points. The Defty lost 3.81 per cent with the rupee moving up after the US Federal Reserve rate cut. Both foreign institutional investors (FIIs) and domestic funds were net sellers. |
| Breadth remained poor with declines far outnumbering advances and volumes were extremely thin. Indices of smaller stocks did worse than the Nifty-Sensex. |
| The Junior was down 9.48 per cent, the Midcaps was down 8.2 per cent but the BSE 500 was up 1.5 per cent. The Bank Nifty lost 9.14 per cent. The CNX IT index was comparatively less affected, despite the stronger rupee, losing only 0.85 per cent. |
| Outlook: By breaking support at 4,600, the market signalled that it could drop quite a bit more. The 4,500 support held and upside resistance was visible at 4,750. Next week will see a lot of daily volatility and the index may swing between 4,500-4,800. Breakouts will depend on global triggers. |
| Rationale: As this is being written on March 20, there are two extra sessions in the US where the impact of the latest Fed cut may cause a revival. Plus the local futures and options (F&O) settlement will guarantee daily volatility "� expect at least one Nifty 200-point session. |
| If the support at 4,500 breaks, the market may drop to 4,350 "� that target projection arose when the 4,600 support was busted last Monday. On the upside, there will be massive selling at 4,800 though 4,900 is a possible upper limit. |
| Counter-view: The derivatives position suggests that there will be a modicum of short-covering and also a sharp increase in volumes as traders try to pack in carryover within three sessions. |
| This could fuel a recovery. The market has been in an intermediate downtrend for nine weeks and it could be time for a correction. However, it would require a dramatic change in sentiment to push the Nifty beyond 4,900. |
| Bulls & bears: Every sector has lost ground in the past week and in some senses, every sector is oversold. Financial stocks, metals and real-estate counters were among the biggest losers while pharmaceuticals, select FMCGs and some information technology (IT) stocks held more defensive ground. |
| Quite a lot of selling was delivery-based and perhaps triggered by margin calls that ended in collateral being sold. The rupee is liable to strengthen further and that will hit IT stocks. However, in several sectors, specific stocks moved against the market or held their ground. |
| The trader can try one of several broad strategies this week. 1) Pick some potential shorts and hope that settlement considerations will not lead to a bounce. 2) Pick a portfolio of defensive stocks that will not lose value as fast as the market 3) Buy some stocks that seem to promise counter-cyclical bullishness. The risks are high whatever you do. The micro-technicals selection contains some stocks that fit each of the above strategies. |
| MICRO TECHNICALS |
| Airtel Current price: Rs 777.75 Target price: Rs 800 |
| The stock looks a fair defensive holding since it has consolidated with decent volume. There is upside potential till around Rs 800 and very little downside with strong support at Rs 765-plus. Keep a tight stop at Rs 765 and go long. Start covering above Rs 800. |
| Cipla Current price: Rs 206 Target price: Rs 225 |
| Cipla has bullish potential and it comes from an industry, which has shown defensive strength. The stock is above its 200 day moving average (DMA) and its 7-DMA and it has seen volume expansion in futures. If it closes above Rs 210, it would have a target of Rs 225. Keep a stop at Rs 200 and go long. |
| Praj Industries Current price: Rs 111 Target price: Rs 101 |
| The erstwhile darling of operators has seen selling on rising volumes. It has broken support at Rs 119 and the next target would be about Rs 101. The major trend is now very clearly negative. Keep a stop at Rs 120 and go short. Reliance Petroleum Current price: Rs 151 Target price: Rs 140 |
| The stock has lost some ground on what appears to delivery-based selling. It has some support at the current levels but that could be broken if there is any further selling. Keep a stop at Rs 157 and go short. Cover the position around Rs 140. If the stock does cross Rs 157, go long with a target of Rs 170. |
| Tata Motors Current price: Rs 650.50 Target price: Rs 675 |
| Tata Motors could be back on the recovery trail since it has broken past a resistance at Rs 640. That will also act as a support on any down-move. There was a useful volume expansion along with the up-move. The target projection would be Rs 675. Keep a stop at Rs 640 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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