Targets range between 2,850 and 3,000. Expect one big session of short-covering with Nifty at 3,450-3,500.
The market gyrated through a big range before hitting a new two-year low. The Nifty lost 6.29 per cent and closed at 3,074 points with a low of 3,046 and a high of 3,648. The Sensex closed at 9,975 for a loss of 5.28 per cent.
The rupee slid to below Rs 49 and the Defty lost 7 per cent. Volumes were low and advances were heavily outnumbered by declines. The BSE 500 lost 4 per cent while the Midcap-50 lost 1.85 per cent. FIIs remained heavy sellers while domestic institutions were net buyers.
Outlook:
The market will test primary support between 3,000-3,050 again next week but this time round the support will break if selling continues. On the downside, one can compute targets ranging between 2,850 and 3,000. Expect high volatility. There should be at least one big session of short-covering and the Nifty could rise to 3,450-3,500 in that.
Rationale:
The Nifty will traverse 200 points or more on every session. There could be one or two bursts of short covering if the ban on stock-lending by PN holders flushes out bears. But there won’t be that much short pressure since it’s two weeks to settlement.
Counter-view:
There is a chance the market could recover to above 3,500 level given one really large session of short covering. The current support resistance calculations are on two year-old prices so error margins are large. There’s no doubt stocks are oversold and some could bounce double-digits as on last Monday. However, any relief is likely to be very temporary.
Bulls & bears:
Next week will see wild swings in both directions and probably, net losses. Traders will need extra margins and tight stop losses. Very few stocks maintained bullishness against the tide. Wannabe bulls should seek stocks that may bounce on short-covering. Bears on the other hand should look for clear downside breakouts where targets can be set.
PSU refiners would be a reasonable gamble for long traders – IOC, BPCL and HPCL have seen some recovery. Banks saw net gains during the week but softened on profit-taking at the end and may lose more ground early in the week.
Cement has come under heavy selling pressure with ACC, Ambuja, Grasim and Ultratech all sliding. Power sector stocks like Bhel, Suzlon, NTPC, PGCIL and Reliance Infra all saw heavy sales. Heavyweights Reliance Industries, Reliance Petro, Reliance Power and Reliance Capital also saw continued selling.
IT stocks looked weak and TCS made a downside breakout. Bharti, Hindalco and L&T were among losers. Pharma and FMCG came under some pressure but retained values better than the overall market. Real estate may see temporary bottoms after heavy losses on Friday – there is some potential for a bounce here.
MICRO TECHNICALS
Bhel
Current Price: Rs 1,191.5
Target Price: Rs 1,100
The stock has broken support at Rs 1,350 on a volume expansion. The minimum downside target would project to around Rs 1,100 and the stock could drop further. It’s difficult to set a stop loss. Keep a stop at Rs 1,225 and if that is broken, go long with a target of Rs 1,300.
HPCL
Current Price: Rs 235.6
Target Price: Rs 250
The PSU refiner is rebounding as crude prices fall. It has a target of Rs 250 before it runs into heavy resistance. Keep a stop at Rs 230 and go long. If the stock closes above Rs 250, it could have an upside till Rs 265. So book partial profits at Rs 250.
L&T
Current Price: Rs 799.7
Target Price: Rs 650
The stock has broken downwards on heavy volumes. It has already achieved its first target of Rs 800. Two possibilities exist. One: it will hit Rs 650, the second target on the breakout. Two: It will bounce to Rs 900. The first is more likely. Keep a stop at Rs 825 and go short. If the stock breaks Rs 825, consider going long intra-day with a target of Rs 885.
TCS
Current Price: Rs 453.85
Target Price: Rs 400
The stock has broken key resistance at Rs 525. It has a minimum downside target of Rs 425 and a likely downside target of Rs 400. Keep a stop at Rs 465 and go short. Book a partial profit at Rs 425 and hold the rest of the position till Rs 400.
Unitech
Current Price: Rs 79.65
Target Price: Rs 90
The stock seems to holding up above support in the Rs 77 - Rs 80 region. It has the potential to bounce till around Rs 95 on short-covering. Keep a stop at Rs 76 and go long. Cover above Rs 90. If the stock falls below Rs 76, it could drop till around Rs 60.
