The market could test 5,300 going into the December settlement
The market bounced with a strong volume expansion to establish a new 52-week high on X-mas Eve. The Nifty closed at 5,178.4 points for a week-on-week gain of 3.82 per cent. The Sensex closed at 17,360 points for exactly the same gains. The Defty was up 4.15 per cent as the rupee rose.
Volumes expanded and breadth improved dramatically in the last two sessions. At the end of the week, every major market segment had established gains. The Bank Nifty outran the pivotal indices and the BSE 500 was up by 3.4 per cent. Both FIIs and domestic institutions were net buyers. Operator buying was also in evidence.
Outlook: The market could test 5,300 on the upside, going into the December settlement. On the downside, reactions will find support at 4,950-5,050. Volatility is likely to be up. There could be a couple of action-packed sessions since next week is also truncated. Most signals are positive.
Rationale: The market penetrated key resistance at 5,180, hitting a new high of 5,198. Although this could not be sustained, it confirms all three trends – short-term, intermediate and long, - are up. Breadth and volume expansion on the breakout are positives. There is a target of around 5,300. However, there may be a narrowing in trading with a focus on the larger F&O stocks.
Counter-view: It is possible that this week saw a lot of short-covering and exits. In that case, settlement week could see net losses and lower volumes than normal. However, there is solid support at 5,050-5,075 and again, between 4,950 and 5,050. Since all three trends are in bullish phase, a big correction is unlikely.
Bulls & Bears: The week ended with net gains across most indices and industry sectors. The Bank Nifty outperformed after several weeks. Other financials and the realty segment also saw net gains. Though this up move in interest-sensitive stocks looks like a technical correction, it could continue. Axis Bank, Bank of Baroda, Yes Bank, IDFC and HDIL may outperform.
The auto industry received a lot of bullish investment calls. Tata Motors has looked strong for weeks but in the past two or three sessions, we also saw money coming into Bajaj Auto, Hero Honda and Mahindra. While IT and pharma also delivered net gains, there was a pattern of profit booking towards the end of the week. The rupee hardening also suggests that IT may ease down or at least, underperform next week. However, big guns like TCS and Educomp still look bullish.
Pharma-healthcare saw Dr Reddy’s, Fortis and Glenmark delivering good returns last week, but money seems to be moving out of here into more aggressively traded counters. Apart from these, a host of movers attracted attention for stock specific reasons. These included Great Offshore, Nilkamal, Maytas Infra, Nagarjuna Construction, etc.
MICRO TECHNICALS
TCS
Current Price: Rs 749
Target Price: Rs 765
Since March 2009, TCS has risen along a 45 degree trendline (split-adjusted prices) and this pattern holds at a new high. Keep a stop at Rs 740 and go long. A long-term target cannot be calculated. But, if the trendline is maintained, TCS should hit Rs 765 by settlement (December 31).
NTPC
Current Price: Rs 229.95
Target Price: Rs 250
The stock has made a breakout on strong volumes and is testing resistance at the current levels. If it can close above Rs 232, it could have a target of around Rs 250. Keep a stop at Rs 225 and go long. Add to the position above Rs 232.
HCC
Current Price: Rs 151
Target Price: Rs 157
HCC has hit a new 2009 high on strong volumes. The chart pattern suggests a target in the range of Rs 157-160. Keep a stop at Rs 145 and go long. Start booking profits above Rs 157. If you wish to hold a position beyond Rs 160, reset the stop loss to Rs 155.
GUJARAT NRE COKE
Current Price: Rs 78
Target Price: Rs 90
The stock has jumped on a strong volume expansion. It has resistance between current levels and Rs 80. If it closes above Rs 80, it will have a target of around Rs 90. Keep a stop at Rs 74 and go long. Increase the position above Rs 80 and reset the stop to Rs 79.
STERLITE INDUSTRIES
Current Price: Rs 860.45
Target Price: Rs 895
The stock has finished a reaction and is consolidating. There is serious resistance at current levels but if it crosses Rs 870, it will test Rs 900. Keep a stop loss at Rs 850 and go long. Add to the position above Rs 870 and reset the stop to Rs 865. Book profits beyond Rs 895.
