Market looks bullish

MACRO TECHNICALS

While the market seems poised for an uptrend, any bout of profit-booking would find support at Nifty 4300.

The market moved to new record highs with the Nifty closing at 4384.85 points for a gain of 1.64 per cent while the Sensex gained 2.14 per cent to close at 14694 points.

The Nifty Junior was up just 0.35 per cent while the Defty saw a rise of 2.36 per cent on a sharp rupee appreciation. The CNXIT and the BankNifty rose by 0.92 per cent and 0.76 per cent respectively.

Breadth signals were marginally weaker with advances only slightly outnumbering declines. The BSE 500 rose 1.74 per cent however "� it was the small caps which traded less bullishly than midcaps and largecaps. Volumes were good "� expanding on the rise. FIIs and mutuals were both massive buyers.

Outlook: The market has consolidated after its breakout two weeks ago. It looks well set to continue its bullish movement. Upside targets would be somewhere between 4425 and 4500 depending on the optimism of the calculator. Any bout of profit-booking would find support at Nifty 4300. There is likely to be huge intra-day volatility.

Rationale: A breakout followed by volume expansion and consolidation suggests that the move is valid. There have already been several bouts of selling which have been absorbed while support at an erstwhile resistance of 4300 has held.

Incidentally the new highs confirm that the market continues to be in a long-term uptrend while the intermediate trend turned positive only 3 weeks ago. So the intermediate trend is also relatively new and could continue for a while.

Counter-view: There were signs of weakness and persistent selling pressure in the Junior stocks especially. The support at 4300 is vital. So far it has held on several tests. If it breaks, the entire move could be nullified.

Bulls & bears: Next week could see speculative buying in IT majors such as Infosys, TCS, Satyam and Wipro where Q1 results will start flowing. This appears to have already started.

Apart from IT biggies, there is bullishness in cement and construction stocks such as ACC, Grasim, Larsen and JP Associates.

Apart from these, bulls were scattered across counters such as Hind Unilever, Mahindra&M, Reliance Comm and Tata Motors. ICICI saw quite a lot of selling which could infect the rest of the banking sector.

MICRO TECHNICALS

Reliance Communications
Current Price: 550
Target Price: 580

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The stock made a breakout when it closed above 535. It has developed fairly high volumes and we can make a target projection till about the 585 level. Keep a stop at 542 and go long.

AkrutI Nirman
Current Price: 476.75
Target Price: 515

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The stock has made a big advance on strong volume expansion. It broke a key resistance at 455. The target would be about 515. Keep a stop at 460 and go long.

This carries a larger risk than most of our trading recommendations because it has an extremely low delivery quantity and very high daily range.

Grasim
Current Price: 2772
Target Price: 2880

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The stock is in a bullish phase where a price rise has been backed by good volumes. It has made a breakout from 2550 levels and is likely to continue rising until it hits massive resistance in the 2875-2900 region. Keep a stop at 2700 and go long.

Infosys
Current Price: 1972
Target Price: 2100

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The stock saw the inception of speculative buying which should last until the Q1 results are declared late next week. It's difficult to make target projections but intra-day prices in the range of 2050-2100 are possible.

The movement is likely to be mostly bullish through the next 3 sessions but there will be a wide daily range. Keep a stop at 1950 and go long.

Larsen & Toubro
Current Price: 2364
Target Price: NA

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L&T continues to rise along a 45 degree trendline. It's impossible to make target projections as such but so long as this line is not violated, the bull run could continue, Keep a trailing stop at 2325, go long, move the stop up by 20 for every 20 rupee rise.

(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)