Nifty crosses the 5000-point barrier

MACRO TECHNICALS

The Nifty has a possible top at 5200, but a reaction would find strong support at 4950.

Excellent volumes and strong carryover marked the settlement week. However all that was eclipsed by the fact that the Nifty crossed the 5000 level, finally closing out at 5021.35 points to register a gain of 3.8 per cent.

The Sensex was up 4.39 per cent, ending at 17291 points. Both major indices registered new all-time records. The Defty rose 4.17 per cent as the rupee strengthened to 9-year highs.

Institutional attitude remained positive with both FIIs and domestic mutual funds pouring funds into the market and increasing exposure as the indices rose.

The Nifty Junior shot up 4.79 per cent while the BSE 500 was up 3.98 per cent. Breadth was good with more advances than declines though volumes were concentrated on the futures and options segment.

Outlook: Obviously, the bull market is healthy and this intermediate trend is strong though momentum slowed on Friday. It's impossible to calculate targets with confidence since we are in a new zone. For what it's worth, the Nifty has a possible top at 5200. Reactions would find strong support at 4950.

Rationale: The market has been rising for around six-seven weeks so there is room for this intermediate trend to continue for another four-five weeks. Institutional exposure has increased above the 4800-level. Profit-booking would probably trigger renewed buying at about 4950.

Counter-view: The current uptrend was sparked by the US Federal Reserve cutting rates. The previous downtrend was also sparked by a US crisis in the subprime market.

Given the level of FII flows and the market's dependency on these, any unforeseen global event could prove to be the trigger for another decline. If the dollar tap was turned off, the market could crash.

Bulls & Bears: The biggest gains came from the financial sector with the Bank Nifty shooting up by 7.74 per cent "�practically every listed bank registered gains.

Even IT stocks gained despite the rupee appreciation "� the CNX IT rose by 4.35 per cent. The surge in bank stocks featured strong gains across the board "� the big movers included heavyweights such as SBI, ICICI, HDFC, Corporation Bank, Bank of India.

Among other financial stocks, HDFC, IFCI, LIC Housing as well as Reliance Capital registered gains. There was massive activity across the Reliance and ADAE group counters for the third week in succession.

This time, RIL showed signs of profit-booking and consolidation but Reliance Energy and Reliance Natural Resources flared up.

Another rupee-sensitive sector, pharmaceuticals bounced despite the apparent problems "� Ranbaxy and Cipla saw strong investment buying. Sail and Tisco both rose on higher steel prices.

MICRO TECHNICALS

ICICI Bank
Current price: 1062
Target price: 1125

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ICICI saw a critical breakout at the 1000 level when it completed a bullish formation on high volumes. It has a likely target of 1125. However it is likely to see a short-term correction to around 1040 levels before it surges again. If you are confident of timing this, go short, with a stop at 1070 and cover at 1045. Then go long with a target of 1125.

LIC Housing
Current price: 239.95
Target price: 255

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The stock has risen steadily since breaking a critical resistance at the 215-220 level. This week volumes expanded sharply. It has a likely target projection till around 255 and potentially till around 275. Keep a stop at 230 and go long. Consider delivery with a 3-0 week perspective.

Ranbaxy
Current price: 434
Target price: 455

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Ranbaxy appears to have seen a trend change from sideways to bullish on the basis of Friday's move. It has a potential target of 455. Keep a stop at 429 and go long. Book profits above 450. Be prepared for a sudden volatility expansion. The move could come in a single session.

Reliance Energy
Current price: 1205.5
Target price: 1250

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When it rose above 1130 on Friday, REL broke out of a trading zone. It has a likely target of 1250. However it has moved quite a lot on that single-session and profit-booking cannot be ruled out. Expect a large intra-day range. Keep a stop at 1170 and go long.

Tisco
Current price: 850.5
Target price: NA

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Tata Steel has seen a two-session rise from 750 to 850. It's impossible to set a target with such a vertical move. Keep a trailing stop at 835 and go long. Move the stop up Rs 10 for every Rs 15 move.

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