An upside breakout is more likely than a slide below 4,450.
The market consolidated at higher levels in a week that featured net gains. The Nifty closed at 4,587 points for a gain of 3.1 per cent while the Sensex was up 3.3 per cent at 15,103 points. The Defty rose 3.35 per cent as the rupee remained quite strong.
Volumes and breadth signals continued to look excellent. FIIs remained net buyers but domestic institutions were heavy sellers. Sell offs pulled down the Bank Nifty but other sectors went up. Advances continued to comfortably outnumber declines. The Junior and Midcaps 50 outran the Nifty, and the BSE 500 was also up 4.5 per cent.
Outlook: The breakout above 4,500 and successive closes above that level sets up targets in the range of 4,750. This could be achieved but stay braced for a near-term correction. Last week, the Nifty range-traded between 4,450-4,635. An upside breakout is more likely than a slide below 4,450.
Rationale: The intermediate trend remains positive though it is now into its 12th week and a correction seems overdue. The pattern last week was steady FII buying matched by persistent DI selling. Traders remained long, tilting the balance in favour of a rise. If the buying by traders and FIIs continues to exceed sales by DIs, the market could rise till around 4,750.
Counter-view: It is quite likely that the next short-term downtrend will trigger a reversal in the intermediate trend as well. As and when the intermediate trend reverses, we could see a slide of 10-15 per cent in the second (corrective) wave of the new bull-market. The support at 4,450 is crucial. If that is broken, the Nifty will slide till 4,300 before it hits the next reliable support.
Bulls & bears: Banks saw a sell off and this was one of those rare periods when the Nifty rose while the Bank Nifty dropped though DCB bucked the downtrend. The IT sector was surprisingly strong given the rupee's strength. Here, Infosys, Satyam and TCS led the way. However, there was a sell-off in IT stocks on Friday and the weakness could continue on Monday.
The main northwards impetus came in real estate stocks and in infrastructure, especially in power stocks. Unitech and HDIL led the real estate sector while scrips like Suzlon, J P Hydro, Reliance Power and NTPC also did well. So did the engineering and construction sector scrips such as GMR, Punj Lloyd and HCC. Metal stocks continued to rule firm.
MICRO TECHNICALS
TATA MOTORS
Current Price: Rs 389.00
Target Price: Rs 355.00
The stock has hit a massive resistance above the Rs 390 level. On the downside, it has reliable support only at around Rs 355-360. Keep a stop at Rs 395 and go short. Start booking profits below Rs 360. Note that if it does close above Rs 395, it may have the impetus to rise till Rs 415 so doubleplus upwards if this occurs.
GTL INFRA
Current Price: Rs 46.50
Target Price: Rs 50.00
A breakout past resistance at Rs 45 has come on high volumes. The target should be Rs 50-plus with a minimum target of Rs 50. Keep a stop at Rs 45 and go long. Book partial profits at Rs 50 and hold one-third of the position since there is a potential upside till around Rs 54.
ZEE NEWS
Current Price: Rs 49.35
Target Price: Rs 55.00
The stock has made a breakout past resistance at Rs 47 on expanding volumes. The target could be around Rs 55-56. Keep a stop at Rs 47 and go long. Book partial profits above Rs 52 and hold 50 per cent of the position until Rs 55 is reached.
IDFC
Current Price: Rs 133.50
Target Price: Rs 140,00
The stock has made a breakout on high volumes. Upside targets are difficult to compute due to a big gap in mid-May. The minimum target should be Rs 140 while the maximum could be Rs 160. Keep a trailing stop at Rs 128 and go long. Move the stop up 5 units for every 5-unit rise.
PETRONET
Current Price: Rs 77.25
Target Price: Rs NA
A big volume expansion on Friday may have energised an already strong uptrend. It's difficult to compute an upside target. The best option is to keep a trailing stop loss at Rs 73 and go long. Move the stop up 5 units for every 5-unit rise.
(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)
