<b>Week Ahead in Mkts:</b> Medium-term bullish

MACRO TECHNICALS

The market is likely to test 4300 levels again by the settlement and could well achieve a projected target of 4350.

After surging to new highs, the major indices consolidated in the latter part of the week. The Nifty rose to a high of 4291 points on Wednesday before settling at 4248 for a gain of 0.79 per cent. The Sensex was up 0.24 per cent at 14338.45 points. The Defty outperformed the Nifty on the back of the strong rupee, and rose by 1.58 per cent.

Breadth and volume signals were fair. By the weekend, declines somewhat outnumbered advances. Volumes rose with the breakout and fell somewhat on the profit-booking that led to consolidation. The Bank Nifty dropped 1.44 per cent as speculation started about another CRR hike. The CNX IT was marginally up while the broad BSE 500 gained 0.8 per cent outperforming the mega-cap indices.

Outlook: The market is likely to test 4300 levels again by the settlement and the chances are, it will achieve a projected target of 4350. On the downside, there is support at 4125-4250. Volatility in settlement week is likely to be high. The medium term prognosis is bullish.

Rationale: The market made a long-awaited upside breakout from a trading range. On Thursday and Friday, there was selling pressure and profit-booking, which was absorbed. Both FIIs and Indian Mutuals were strong buyers and the market usually does well when institutional interests coincide. Momentum signals are recovering from lower levels.

Counter-view: The breakout has taken the market to a new level. But the selling in bank stocks could lead to a more generally bearish outlook if the RBI does hike the rates and CRR beyond the expected levels. But the derivative settlement should also induce a healthy carryover and the market is likely to make net gains until Thursday at least.

Bulls & Bears: Several majors saw buying on specific news or rumours. For example, HDFC rose on the back of Carlyle's investment. Satyam and Patni are rumoured to be potential acquisition targets. But the overall sentiment was also strong by Friday afternoon.

The IT sector made a little comeback towards the weekend with Infoys, Wipro, Satyam, Tech Mahindra, Patni and Polaris among the prominent gainers. There were sharp gains across the power sector with Suzlon zipping up and PTC and NTPC also doing well.

On the downside, banks did badly through the week but there was a small recovery on Friday. This could have been due to short-covering action. However Ing Vyasa and Corporation Bank stayed consistently bullish. PSU refiners were a drag on the sentiment with considerable losses through the week for BPCL and HPCL.

MICRO TECHNICALS

Larsen & Toubro
Current Price: 1738.85
Target Price: 1825

The stock has gradually developed higher volumes while remaining locked into a range-trading pattern. It has a likely upside of 1830 if it closes above 1745. It has traded above that level several times in the past 5 sessions. Keep a stop at 1720 and go long. Book partial profits above 1765.

Suzlon
Current Price: 1376
Target Price: 1525

There was a huge jump on Friday coupled to a massive volume expansion on the basis of the successful REpower bid. It has completed a bullish formation and it could see a move till a projected target of 1525 if the move is valid. Keep a stop at 1325 and go long. Be aware that there is an extra risk until the details of the takeover are absorbed.

Patni Computers
Current Price: 549
Target Price: 610

The stock has risen on rumours of entry by IBM. As in Suzlon, there is always extra risk in these takeover situations where breaking news can rapidly alter perceptions. However the pattern is quite bullish. There is a target projection of 610. Keep a stop at 530 and go long.

PTC
Current Price: 66.75
Target Price: 77

The stock has jumped on extreme volume expansion over the past three sessions, moving from a low of about 56 to current levels. This sets up a bullish formation for what was hitherto a depressed stock. The trend reversal has a projected target of about 77. Go long with a stop at 65.

Sail
Current Price: 148.15
Target Price: 157

SAIL continues to rise steadily, ignoring the overall market trend. The weekly priceline is rising at a slope of 45 degrees. It's not possible to make long-term target projections but you can stay invested while the uptrend continues to maintain the same slope. It should rise till about 157 next week if the trend holds. Keep a trailing stop at 141.5 and go long. Raise the stop 3 rupees once the stock rises past 151. Book some profits above 155.