The ratio of advances to declines was negative and volumes were low. Banks suffered disproportionate losses with the Bank Nifty down 8.3 per cent. In contrast to large-caps, the BSE 500 (-3.68 per cent) and the Nifty Midcap-50 (- 2.95 per cent) outperformed and the CNXIT, down 3.56 per cent, was buoyed by the rupee weakness.
Outlook: The market has broken one key support to land upon another strong support at 4950. Next week, it could range-trade between lows of 4800 and highs of 5150. Breakouts beyond these levels would be significant. Expect high daily volatility.
Rationale: Short-term projections are complicated by settlement. There will be short-covering and also carryovers. If the trading range breaks, the market will move till either 4500 or 5600. The fact that the 200 DMA was breached last week makes bearishness more likely and this is backed by several bearish signals from momentum indicators.
Counter-view: The market has been range-trading for three weeks around the key 200 DMA. This indicates that the long-term trend is uncertain though every macro-economic indicator says it will eventually go South. If there is a break out above 5300 (the last intermediate peak), the technical outlook would actually be quite positive.
Bulls & bears: There weren't too many bulls in evidence. There was some contrarian buying in PSU refiners and marketers in the hope that rising crude prices would lead to a bailout of some description. This is news-based and there could be a price collapse if the government pussyfoots. Incidentally, prospecting and exploration stocks plunged.
The rest of the market showed a South-bound trend with the promise of sharply increased volatility. As mentioned earlier, banks were worst-hit, partly due to SBI's flip-flop on tractor loans. There could be a spike in the sector driven by short-covering next week. Axis Bank, Corporation Bank and ICICI Bank would be favoured counters in that case.
More From This Section
Among FMCGs, ITC took a hammering. The IT sector was due for some profit-booking after a recent rise, although it retains defensive value due to the low rupee. The selling should reverse mid-week. Unpredictable volatility is likely in telecom counters.
Right now, the trend seems to be up and Idea, RCom and Airtel are all generating high volumes. Lupin and Cipla would be the best picks for wannabe pharma bulls.
MICRO TECHNICALS
Axis Bank
Current Price: Rs 799.45
Target Price: Rs 830
Axis has an intriguing priceline. It has been forced down to a reasonable support on heavy selling. But both volume and deliveries plunged on Friday. If the scrip closes below 790, it will fall till 760. If it holds above 795, a rise till 830 is likely.
The proximity of settlement makes short-covering more likely. Keep a stop at 790 and go long, covering at 830. If the scrip drops below 790, go short and aim to cover at 760.
GMR Infrastructure
Current Price: Rs 138.5
Target Price: Rs 126
The stock broke a key support on Friday at 142 and its next reliable support is between 126-130. GMR is like to trade down till at least the high-end of that zone. Keep a stop at 142 and go short. Cover at 130 unless you're feeling optimistic and looking to catch an intra-day dip till 126.
Idea
Current Price: Rs 107.45
Target Price: Rs 123
Starting late April, there has been a massive volume expansion without much price change. On Friday there was another volume expansion and deliveries also jumped while the price was unchanged.
This seems like a consolidation pattern, which could be followed by a promising rise. There's some resistance at 111 but if that is broken, Idea could have a clear run till 123. Keep a stop at 103 and accumulate with a 10-session perspective.
Lupin
Current Price: Rs 683.8
Target Price: NA
There's been a spike in volumes accompanying a recent price rise. Delivery has also been healthy suggesting that this is investment buying. It's impossible to set a target since the scrip is in a new zone. Keep a trailing stop at 670 and go long. Move the stop up 5 units for every 10 unit rise.
RNRL
Current Price: Rs 106.25
Target Price: Rs 95
The stock broke a key support on Friday, when it dropped below 110. It has some support at 105 but if that is broken, it is likely to dip till the 95-96 levels. Keep a stop at 110 and go short. Start covering below 99.
(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)