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| Breadth signals remained nearly neutral. While volumes were low, there was a distinct rise in trading interest on Wednesday and Thursday. Most traders are however nervous since April will bring a change to T+3 as well as a physical settlement in stock derivatives. The changes in market mechanism could cause some upheavals in early April, because of logistical problems gearing upto T+3.
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| It appears that the support at Sensex 3450 held because the market bounced from around those levelsthis week. This 3450 support is absolutely crucial because if the market falls below this level, it could fall upto around 3300 levels before finding reliable support. The Nifty equivalent support for 3450 is at 1120 and that was also severely tested.
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| If next week begins weak, we could thus see the market fall another 4-5 per cent. A bottom around 3275-3285 would be reasonable on another count because the 200 DMA is at around those levels and the market shouldn't break that if the long-term trend stays bullish.
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| Assuming that the intermediate trend has been negative since the Budget, we could see a bottom anywhere in April. Fibonacci timelines suggests recovery only in mid-late April or even early May.
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| The good news is that the Tech pivotals seem to have bottomed and one could be cautiously optimistic about them. Wipro, Infosys, Satyam, Zee, Digital and Hughes Software all showed signs of recovery after coming under selling pressure in the last few sessions. The next week could be stable or good for ICE stocks.
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| The PSU refinery sector is still looking okay with IOC and BPCL particularly strong. Among other stocks, there seems to be value-buying in ACC, Asian Paints, Dr Reddys, East India Hotels. There seems to be operator-driven activity in Kodak, Crompton Greaves, CMC, Hoechst and Mirc Electronics. Among Auto stocks, TVS continues its bull run and Telco seems to have bottomed. There are enough heavyweights among the above counters to keep sentiment afloat.
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| The derivatives segment went through the usual settlement upheavals on Thursday. An earliersuggestion of 1140 Nifty Put is well into the money now and it makes sense to also hold the 1120 Nifty Put in case the 1120 support is breached. April and May 1160 and 1180 calls may also be profitable depending on the available spreads.
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| The Nifty futures are interestingly poised with April at 1143 (spot 1129) while May is at 1145. Assuming continued weakness through early April, a bear spread of selling April and buying May, may be profitable trade. At least one leg of this transaction should be profitable - perhaps both legs, if the market weakens in April and then strengthens in May. In any event, the differential between April-May should widen. |
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