There is some support at 2,700, but that is very likely to be tested and broken.
The market found some sort of support on Friday after sliding through most of the week. The Nifty ended down 1.55 per cent at 2,828 after hitting a low of 2,701. The Sensex was down 0.89 per cent at 9,323 points. The Defty lost 1.73 as the rupee lost a little ground.
Smaller stocks did worse than the pivotals in a week where volumes were low and the advance-decline (A/D) ratios were strongly negative. The Junior lost 2.2 per cent and the Midcaps lost 2.1 per cent. The BSE 500 was down 1.7 per cent. Both FIIs and FIs were heavy net sellers through the week.
Outlook: Another decline is on the cards next week. There is some support at 2,700, but that is very likely to be tested and broken. A drop till the 2,550-2,600 levels is likely. On the upside, there is strong resistance above 2,875.
Rationale: The drop below 2,875 in the first week of 2009 triggered off a bearish breakout. That has a target of around 2,550 and given previous trading patterns, the market is likely to test that level. On the upside, a climb above 2,875 would suggest that the breakout was a false signal. In that case, a climb back to 3,100-plus is possible.
Counter-view: The recovery on Friday appeared reasonably strong. If it is sustained for another session, it will push the market back past the 2,875-2,900 zone. However, the continued low volumes, negative institutional attitude and poor A/D ratios make this look unlikely.
Bulls and Bears: The key sector was banking, which tanked in a big way with the BankNifty losing over 6 per cent. The pricelines of both private banks and PSU banks are hovering at key support levels. The direction of the market will probably be set by this sector. Real estate stocks such as DLF and Unitech continued to look weak.
IT remained stable with Infosys and TCS delivering results on the higher side of expectations and the CNXIT was a marginal loser. HCL Tech saw speculative investment that could push it up and the mayhem continued in Satyam, which is a playground for speculators at the moment.
Telecom bounced on the weekend with Reliance Communication and Airtel both rising substantially. Two-wheeler stocks also bounced with Hero Honda and Bajaj Auto running up side-by-side.
Sugar stocks also saw selective investment with Bajaj Hindusthan and Balrampur moving up. Among PSUs, NTPC and Neyveli Lignite are doing well. There is some speculative action visible in PSU oil counters such as HPCL, BPCL and IOC. Market leader, Reliance Industries, also saw some revival on Friday after a bad week.
MICRO TECHNICALS
Bharti Airtel
Current Price: Rs 635
Target Price: Rs 655
The stock appears to have bounced off support in the range of Rs 610, albeit the recovery has come on low volumes. It is hitting resistance at Rs 640, but if it crosses that level, the stock has the potential to move till Rs 655-660. Keep a stop at Rs 625 and go long. Cover the position above Rs 655.
Bajaj Auto
Current Price: Rs 462
Target Price: Rs 500
The stock shot up on huge volumes on Friday. It has the potential to move till Rs 480 at least, and if it breaks resistance at that level, it will climb to Rs 600. Keep a stop at Rs 450 and go long. Book partial profits at Rs 480.
DLF
Current Price: Rs 195
Target Price: Rs 180
The stock continued to show weakness and test support at Rs 180-185. All the indications are that the support be tested again and probably broken. Keep a stop at Rs 200 and go short. Book profits at Rs 180. If DLF closes below Rs 180, go short again with a stop at Rs 185 and a target of Rs 160.
HCL Tech
Current Price: Rs 118
Target Price: Rs 126
There appears to be some speculative investment in HCL Tech although it is generating very low volumes. It could have a minimum upside till around the Rs 125 and if it closes above Rs 126, it would complete a bullish formation with a target of Rs 140-plus. Keep a stop at Rs 114 and go long.
ICICI Bank
Current Price: Rs 424
Target Price: Rs 405
The stock recovered from Rs 405-410 on short-covering. However, it is generating very low volumes and this seems like a key support that will be tested again. If ICICI closes below Rs 405, it could have a downside till Rs 375. Keep a stop at Rs 429 and go short with an initial target of Rs 405.
