Momentum slowing down

MACRO TECHNICALS

Expect range-trading between 4450 and 4650 amid volatility ahead of derivatives expiry.

The market registered net gains during the week but the momentum slowed somewhat. The Nifty gained 1.36 per cent in closing at 4566 points and the Sensex was up by 1.92 per cent at 15565 points. The Defty was up 1.67 per cent as the rupee continued to shine. Both FIIs and mutual funds were massive net buyers.

Breadth signals were positive but not very strong. Most of the action was concentrated in the Sensex rather than the broader indices. The Nifty Junior was actually down 0.62 per cent and the BSE 500 was up 1.38 per cent underperforming the Sensex. Volumes were average, despite the strong institutional buying.

Outlook: The market is running into profit-booking and next week could see consolidation and range-trading between 4450 and 4650 with alternate bouts of profit-booking and buying. A big carryover at the derivatives settlement may drive the market up late in the week. Expect lots of intra-day volatility.

Rationale: The pattern suggests quite strongly that retail traders and probably operators are booking profits. There is resistance above 4550 and decent support at 4450. There is a lot of F&O open interest and that could translate into a big carryover. Naturally such a move will tend to be narrow with low volumes outside the F&O stock list.

Counter-view: The trend is obviously positive and the long-term trendline appears to be getting steeper if one looks at weekly charts of the Sensex and Nifty. Despite being in uncharted territory, the market may hit new highs again. A drop below 4450 would be triggered only by shockingly adverse results or some unpredictable global news-event.

Bulls & bears: Movements were stock-specific given the Q1 result flow. The winners included a couple of telecom stocks in Bharti and RComm but Idea Cellular saw a sell off on Friday. Other big winners included Bharti, Bhel, L&T, Reliance Industries, Tata Steel and a couple of surprises in NLC and PTC.

GMR Infrastructure appears to have weathered a sell off and looks set to rise again. DLF has gained quite substantially since listing and Unitech seemed to recover from a support "� this could be a spin off effect from sentiment created by the highly-successful Omaxe IPO.

Sector-wise: IT continues to be a drag. The CNXIT has in fact been flat or tending to bearish since mid-February and even TCS doesn't seem capable of defying the sector trend. Banks continue to do well but investment is becoming more selective ahead and moves choppier as everybody awaits the Credit Policy at month-end.

Auto stocks are lacklustre. Cement stocks such as ACC and Gujarat Ambuja reacted down on Friday after doing well earlier in the week. PSU Refiners are mostly down on higher crude prices

MICRO TECHNICALS

Larsen & Toubro
Current Price: 2479
Target Price: 2525

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L&T has made a breakout from a brief period of range-trading with a strong volume expansion. It has a short-term target of 2525 and it could move a lot further given a very strong long-term bullish trend. Keep a stop at 2425 and go long. Book partial profits at 2525.

Bharti Airtel
Current Price: 923.85
Target Price: 950-970

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The stock has made a breakout in the past two sessions on a volume expansion. It has a target projection of between 950-970 depending on your level of optimism. Keep a stop at 905 and go long. Book at least partial profits around 945 level.

DLF
Current Price: 646.8
Target Price: 640-670 (Range-trading)

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First the caveat "� the stock has not been listed long enough to provide a clear trend. However it has gained consistently since the fifth session post-listing. It seems to be running into profit-booking above the 645 mark and now developing a range-trading pattern between 640-670. This offers intra-day trading prospects. Keep a stop at 640 and go long if it is below 650 and go short above 660 with a stop at 665.

PTC
Current Price: 97.8
Target Price: NA

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The stock has jumped from 70 to triple-figures in just eight sessions. It has also seen a massive spike in volumes. It's impossible to project a target price from this vertical pattern. Keep a stop at 90 and go long. Move the stop up by Rs 5 for every Rs 7 worth of rise. Consider taking delivery "� this has all the hallmarks of a long-term trend reversal from range-trading to bullish.

Neyveli Lignite
Current Price: 81.3
Target Price: NA

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The stock saw a big spike from 68 to 78 on Thursday accompanied by a huge volume expansion. The move continued on Friday albeit profit-booking pared gains a little. There is a lot of resistance between 77-85 so, there may be a period of consolidation. Keep a stop at 74 and take delivery with a perspective of about three weeks.

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