Nifty at key support level

MACRO TECHNICALS

If Nifty dips below 4075, it could drop till the next strong support at 4025 points.

The market's behaviour reversed post-settlement. After hitting an intra-day high of 4219.7 points on Thursday, the Nifty crashed on Friday and finally settled at 4083.5, with a negligible change from the previous week.

The Sensex was very nominally up at a close of 13908 points. The Defty however, rose 2 per cent as the rupee strengthened.

Breadth was marginally positive. Advances outnumbered declines and the BSE 500 was up 0.44 per cent. Volumes tapered sharply after the settlement as the market plunged on profit-taking.

The Bank Nifty gained a disproportionate 2.78 per cent on the basis of a credit policy that left rates unchanged. The CNX IT dropped 1.56 per cent because of the rupee factor. The May F&O settlement is too new to read much into put-call ratios.

Outlook: The likelihood next week is either range-trading with a small upside,or a further decline. The Nifty could fall further to support around 4025 or lower, till the 3975 levels. On the upside, there's clearly delineated resistance starting at 4175. A decline looks most likely.

Rationale: Momentum indicators such as the 14-day RSI and 10-day ROC are showing sell signals. The Nifty is at a key support level "� if it dips below 4075, it could drop till the next strong support at 4025. If 4075 holds, the market will range-trade between a level of 4075-4200.

Counter-view: It would take a big volume expansion to drive the market up to test its all-time highs at Nifty 4239. The FIIs and Indian mutual funds were both net buyers last week.

The Defty actually hit an all-time high on Thursday. So, it's possible - if both institutional groups increase their buying next week. If not, there's either range-trading or a decline in prospect.

Bulls & bears: Most heavyweight stocks appear to be bearish or neutral at best. Banks may be due for a sell-off "� the financial sector rally appeared to be driven by sheer relief and there was profit-booking on Friday itself.

HDFC, HDFC Bank, ICICI Bank and SBI all looked as though they were likely to lose ground again on Monday. IFCI continued it's bull-run.

IT stocks will also remain under pressure until the rupee bull-run eases off. Infosys definitely witnessed selling pressure. i-flex looked the best defensive stock in this space.

Bharti Airtel, Cipla and Reliance Industries all took a hammering. So did Grasim, Gujarat Ambuja, Reliance Communications and Tata Steel. Power equipment "twins" ABB and Siemens did see positive investment however.

MICRO TECHNICALS

Cipla
Current Price: 217
Target Price: 205-210

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The stock took a major hammering after disappointing Q4 results. It busted a key support at 225 on a huge volume expansion. It has a downside till the 205-210 range and any reversal will peter out at 226. Keep a stop at 225 and go short. Cover below 210.

IFCI
Current Price: 40.35
Target Price: 43.5

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The stock has very powerful support at 39 and there's a lot of open interest in the 40 call. It is possible to project a target till 43.5 and the steep bull run could continue beyond that point. Keep a stop at 38.5 and go long. Book partial profits above 43.

Indiabulls Real Estate
Current Price: 340
Target Price: 325

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The stock seems to have started a reaction after hitting resistance between 355-365. It's still generating big volumes since it's a new-listing. There appears to be a downside till the 320-325 level.

Keep a stop at 345 and go short. Start covering the short at 325. Reverse the position and go long if it drops below 320, with a stop at 312.

Siemens
Current Price: 1170.35
Target Price: 1210

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The stock is developing a bullish pattern with a chart breakout coupled with decent volumes. It has a minimum potential target of 1210 and optimists could suggest that the run will continue till the 1240 levels.

The issue is major resistance starting at current levels and running all the way till 1215. Keep a stop at 1155 and go long. Cover above 1200.

Reliance Industries
Current Price: 1539
Target Price: 1490

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The stock has bounced from a key support at 1532 after selling that pushed prices down from the 1610 level. If the current level is broken, there is more reliable support at 1490. Keep a stop at 1555 and go short. Cover below 1500.

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