Intermediate correction may be around the corner.
In a truncated week, the market hit new 2009 highs and crossed the levels at which it had traded a year ago. The Nifty touched 5,110 points before pulling back to close at 5,083.4 points for a week on week gain of 2.51 per cent. The Sensex closed at 17,134 for a gain of 2.64 per cent. The Defty was up 3.24 per cent as the dollar continued to slide.
Breadth signals were decent with advances outnumbering declines and a wide range of stocks being traded. Volumes were fairly good. Big stocks outperformed smaller ones. The BSE 500 was up only 2.1 per cent and outpaced by the Sensex-Nifty. Most of the bullishness was due to buying in the derivatives segment by FIIs who pumped in almost Rs 3,000 crore in just three sessions. Domestic institutions were net sellers.
Outlook: The market ran into resistance around the 5,075-5,125 zone but it has a target projection of about 5,200-5,250. A correction sometime in the next 5-7 sessions is on the cards. If the market closes below 4,950, it's likely to slide till at at least 4,750.
Rationale: There's a bearish double-top pattern at around 5,080-5,100 level. This could mean a small short-term correction with the intermediate target of 5,200+ being achieved anyhow. But the intermediate trend has also now been up for 12 weeks and it may be on the verge of reversal. The first signal would be the breach of primary support at 5,000 and secondary support at 4,750 would then be tested.
Counter-view: An intermediate trend, which is in phase with the long-term trend (as it is now), can last for up to 16 weeks though this time-extension is unusual. It is possible that the market will continue its pattern of higher tops and bottoms for several more weeks. The key seems to be FII attitude. They have pumped in over Rs 15,000 crore in the past four weeks, over-compensating for net domestic selling. If the FII buying momentum continues, so will the intermediate trend.
Bulls and bears: Banking shares in general and speciality finance stocks like IDFC outperformed the market. Among majors, ICICI made a new upside breakout. The BankNifty rose by 4.8 per cent. The IT industry also did very well with the CNXIT up 5.5 per cent. Results are eagerly awaited in the IT industry and expected to beat consensus.
Surprisingly perhaps, Airtel responded positively to the MTN deal being called off. Pharma shares continued to rise in what appears to be a useful trend. Real estate also had its winners with Parasvnath leading the way. KS Oils and Kingfisher continued to generate lots of volumes. PSUs like Ispat Industries and Shipping Corporation saw some speculative buying.
MICRO TECHNICALS
HDIL
Current Price: Rs 335.20
Target price: Rs 355
HDIL is testing resistance close to its highs of Rs 340. A breakout past that level would set up a move till around Rs 355-360. Keep a stop at Rs 330 and go long. Add to the position above Rs 340. Book profits above Rs 355.
AXIS BANK
Current Price: Rs 1,009.30
Target price: Rs 1,030.00
The stock has shot up on high volumes. It has a minimum target projection of Rs 1,035 and it could move further since it is at a new 52-week high with no resistance. Keep a trailing stop loss at Rs 985 and go long. Move the stop up 15 units for every 15 unit price rise.
INDIABULLS SECURITIES
Current Price: Rs 58.70
Target price: Rs 67.00
Volumes have doubled and the stock is testing resistance at around the Rs 60 mark. If it can close above Rs 60, it would have a target of about Rs 67. Keep a stop at Rs 56 and go long. Add to the position above Rs 60. Book partial profits at above Rs 65.
NIIT
Current Price: Rs 76.35
Target price: Rs 83.00
The stock has made a breakout on higher volumes and it has been in a long-term uptrend since mid-March when it traded below Rs 15. It should have a target of between Rs 82-84 and there is very little resistance between Rs 76-81. Keep a stop at Rs 74 and go long. Book profits above Rs 82.
PATEL ENGINEERING
Current Price: Rs 483.75
Target price: Rs 525.00
The stock hit a high of Rs 525 and corrected back within three sessions to the current levels. It seems to have found decent support. It should move up again to test Rs 525. Keep a stop at Rs 475 and go long. Book partial profits at Rs 515 and clear the position at Rs 525.
