With volumes appreciably higher, the upside move may continue
The market spurted up again, breaking several important resistances. The Sensex closed at 3180.75 points, up 4.29 per cent.
The Nifty was up 4.02 per cent at 1006.8 points. The Defty underperformed with a rise of 3.68 per cent as the dollar recovered a little ground versus the rupee.
The market breadth was quite good with advances comfortably outpacing declines. Volumes were appreciably higher with especially strong mid-cap interest.
The BSE 500 went up by 5.05 per cent with the positive divergence indicating the specific area of interest. The Nifty Put Call ratio fell to 0.4 after settlement on Thursday.
Outlook: The outlook remains extremely positive for the market in general and for mid-caps in particular.
However, the Sensex and Nifty face resistance at upwards of 3215/ 1020. If volumes are sustained, those resistances could be broken next week.
In the medium-term of 4-6 weeks, we would certainly expect those resistances to be broken.
Rationale: The rise started with a breakout from a trading range in mid-May. The move has been backed by excellent breadth and good volumes.
FIIs and some Indian FIs have come in as the rally has been confirmed. The major Indices climbed above their 200 DMA in the last week's trading, suggesting that the major market trend has turned positive.
An uptrend of this nature could be sustained through another 6-10 weeks.
The potential targets, once current resistances in the Sensex 3215-3230/Nifty 1015-1030 zone are broken, should be around Sensex 3480/ Nifty 1120.
Of course, those targets may take several months to achieve since there is plenty of resistance in-between.
Counter view: There doesn't seem to be a large probability of a downslide. But the market is running into resistance.
There is a good chance that next week will feature range-trading between Sensex 3130-3225/ Nifty 975-1025. Momentum indicators weakened on Friday even as the indices rose.
Bulls and Bears: As has been the case throughout this rally, it was the old economy stocks that provided impetus with tech stocks lagging or moving against the rest of the market. Every sector other than tech seemed to be bullish.
As a block, PSUs shot up last week with energy stocks being the most favoured. While SCI and Sail had buyers, BPCL, HPCL, ONGC and IOC saw enormous volumes coupled with price rises.
Private sector energy stocks like IPCL and Reliance also did well as did single refinery PSU Kochi. Banks saw profit-taking on Friday after running up all week.
Buyers were spread across the entire economy. Bullish stocks this week included Amara Raja Batteries, Apollo Hospitals, Apollo Tyres, Aurobindo Pharma, Bajaj Auto, Century Textiles, Dabur, Dr Reddy's, Essel, GE Shipping, Hinduja TMT, IDBI, Jaiprakash, Jindal Steel, L&T, LIC Hsg, Madras Cement, Ranbaxy, Tata Tea, Thermax, Tisco and Zee Tele.
All these stocks moved strongly, showing the classic pattern of price rise combined with volume expansion.
A few are hitting resistance zones but many have jumped into new territory. This augurs well for the new bull market.
MICRO TECHNICALS
ONGC
Current Price:478
Target Price: 625
It would be as easy to pick Indian Oil or BPCL as outstanding bull prospects in the PSU energy sector. BPCL is covered in the derivatives segment and ONGC makes the cut ahead of IOC because it has better liquidity.
Any, and every, PSU stock is vulnerable to the irrationality of electoral politics.
Given that, ONGC seems to have long-term prospects of moving above the 600 level.
The price-pattern on long-term monthly charts suggests that ONGC has a potential price-target of 625. Investors should be prepared to hold for at least 6 months. Keep a stop at 350.
Apollo Hospitals
Current Price: 118.75
Target Price: 137
The stock completed a bullish saucer formation on excellent volumes. This has a target of about 137, inside a likely timeframe of about 3 weeks. There ought to be good support between 110-115 in the event of a reaction.
Go long and keep a stop at around 110. Be prepared for resistance starting around 126 and book partial profits anywhere above that level.
GE Shipping
Current Price: 49.5
Target Price: 54
The stock spurted last week, climbing to a five-year high on fair volumes. It has a reliable price-target of about 54. Despite the strong uptrend, it is likely to run into insurmountable resistance around those levels.
The current spurt looks an exhaustion move
