Get set for post-Budget breakout

MACRO TECHNICALS

A lacklustre week ended with net losses across most sectors except for IT stocks, which saw a small recovery. The Nifty closed at 5,110.75, down 3.62 per cent while the Sensex was down 4.23 per cent at 17,349 points. The Defty was down 4.4 per cent and the Junior was down 3.71 per cent while the NSE Midcaps lost 1.69 per cent.

Background signals were poor. Volumes were low and advances were outnumbered by declines. The BSE500 was down 3.3 per cent. FIIs were net buyers, domestic institutions were net sellers.

Outlook: Next week is likely to see the continuation of range trading in the early stages with high intra-day volatility. Since the Nifty is on reasonable support, it is likely to move up a bit, hitting resistance at 5,350-5,400. The Budget next Friday could provoke a decisive breakout in either direction.

Rationale: This has been a low-key settlement with very low volumes. The market has remained stuck inside a broad trading range of 4,800-5,600. It is now sitting on decent support along the 200 DMA and an up-move seems slightly more likely than a continued downtrend.

The Budget is usually a big enough event to set a new trend. While possible post-Budget direction is difficult to read, it could easily cause a move of 10 per cent, especially if it brings volumes back into the equation. A volume expansion is again, somewhat more likely to lead to a rise than to a fall.

Counter-view: The market is hovering just above the 200 DMA. If it closes below that and then breaks the support at 4800, it could be a long-term bear market. One positive is that expectations from the Budget are not very high "� the market is more likely to be pleased than disappointed if there is a better-than-average budget. Bulls & bears: IT stocks did well this week as mentioned earlier. Most majors across the futures and options (F&O) were however, stuck inside trading ranges and drifted down. The move in IT was well distributed with majors like Infosys, Satyam and TCS all recovering from recent lows. Non-ferrous metal stocks such as Sterlite, Hindalco and Nalco all saw a pullback and so did Sail among steel counters.

Apart from these two groups, winners were scattered and stock-specific including stocks as diverse as Ambuja Cement, Cipla, Dabur, IVRCL, Peninsula Land, Shree Renuka and Tata Power.

On the losing side, banks did disproportionately badly except for Centurion. Bajaj Auto ended a week that had started promisingly with a massive sell-off. The Reliance and ADA Group counters continued to generate massive volumes without however, showing signs of recovery.

MICRO TECHNICALS

Cipla
Current Price: Rs 198.8
Target Price: Rs 210

The stock has risen on a strong volume expansion. It has a minimum target of Rs 205 where it will hit a serious resistance. However, it will probably beat that on an intra-day basis at the least and go onto test Rs 210. Keep a stop at Rs 194 and go long.

Hindalco
Current Price: Rs 192
Target Price: Rs 210

In the past 6-7 sessions, the stock has risen from Rs 150 on strong volumes. It seems to have completed a bullish saucer formation. The target projection would be about Rs 210 and it may go further since there has been a major trend reversal. Keep a stop at Rs 185 and go long.

IVRCL
Current Price: Rs 467.95
Target Price: Rs 505

The stock has seen strong buying in the past three or four sessions. It has a target projection till the Rs 505 level, though there are several resistances en route. Keep a stop at Rs 455 and go long.

Peninsula Land
Current Price: Rs 97.45
Target Price: Rs 115

The stock has carried out a smart recovery from the Rs 75 level and it has completed a promising formation. It could have a clear run until Rs 115 where it will strike major resistance. Keep a stop at Rs 92 and go long. Book a partial profit at Rs 105.

Tech Mahindra
Current Price: Rs 691.5
Target Price: Rs 795

An intriguing formation has developed in Tech Mahindra where the stock appears to be generating massive volumes after it bottomed at Rs 675. Assuming this is investment buying, the bounce could pull it back upto Rs 795-800 levels. Keep a stop at Rs 680 and buy with a 15-session perspective.