The market turned weak on the cusp of settlement and made a partial recovery in the first session of the December settlement. The Nifty ended with a net week-on-week loss of 2.2 per cent, closing at 4,941.75 points while the Sensex was down 2.3 per cent at 16,632 points. The Defty lost 2.5 percent with the rupee losing ground.
Breadth was decent in that a wide variety of stocks were traded but the advances far outnumbered declines. Volumes were good overall. The institutional attitude was mixed with the FIIs being heavy sellers while domestic institutions bought in smaller quantities. The BSE 500 was down 2 per cent while the Midcaps were down 2.7 per cent.
Outlook: The market looks most likely to range-trade between 4,800-5,100 with some chances of a breakout in either direction. The intermediate correction may not be over yet. There is good support in a band between 4,700-4,800 and equally strong resistance between 5,050-5,150.
Rationale: Last week, the Nifty made a top of 5,138, which is a lower peak compared to the last peak of 5,181 (the 2009 high) in late October. The pattern of lower tops would be interpreted as part of an ongoing intermediate correction.
However, this downtrend would be confirmed as still in force, only if the next bottom is lower than 4,538 (the November 3 low). If the support at 4,700-4,800 holds leading to a pattern of higher lows, or the resistance at 5,050-5,150 breaks (meaning higher tops), the intermediate downtrend will have reversed.
Counter-view: Intermediate trends last anywhere between 4-12 weeks and this one has been in force for around 5. So it has the potential in terms of time to continue. The momentum signals are near neutral. Balanced against that, the long-term trend seems positive – the 200 day moving average is still rising. A positive long-term trend generally means shorter corrections. Fibonacci analysis also suggests that 4,538 is unlikely to be broken.
Bulls & Bears : Most major stocks showed patterns similar to the Nifty-Sensex. They are poised near strong supports and face powerful resistance above current levels. Optimists will be looking for trend reversals and bullish moves up from the supports while pessimists will look for shorts.
Sector wise, almost every high-weighted sector saw many losers. IT was hit by fresh revelations about the magnitude of the Satyam scam and the CNXIT lost 3.7 per cent. Banking was hit by fears of exposure to the potential meltdown in Dubai and the Bank Nifty lost 2.9 per cent. Metals and realty stocks slid as well. Engineering and construction scrips were also hard hit. There were isolated winners in pharma and FMCG and continued cautious investments in energy and auto stocks. The power sector could see an earlier turnaround than most others.
MICRO TECHNICALS
ICICI Bank
Current Price: Rs 850.9
Target Price: Rs 830
The stock has reacted sharply on high volumes and it could fall further. The nearest reliable support is around Rs 830 and if that is penetrated, Rs 810-815 may be tested. Keep a stop at Rs 860 and go short. Either cover at Rs 830, or partially cover, intending to clear the position at Rs 815.
Indraprastha Gas
Current Price: Rs 167.6
Target Price: Rs 176
The stock seems to have completed a correction to a strong support. On the next upmove, it should test resistance at around the 2009 high of Rs 176. If it closes above Rs 176, it would have a clear run till around Rs 185. Keep a stop at Rs 165 and go long. Book partial profits at Rs 176, and shift the stop up to Rs 172.
GVK Power
Current Price: Rs 50.55
Target Price: Rs 53
The stock has fallen to a strong support at the current price. If it has completed its correction, it is likely to bounce back till around the Rs 53-54 levels. Keep a stop at Rs 49.5 and go long. Book profits above Rs 53.
Reliance Industries
Currrent Price: Rs 1,046
Target Price: Rs 1,100
A stock split usually leads to greater liquidity. But in RIL, this effect is hardly noticeable because it was always very liquid. Immediately after going ex-bonus, the scrip has been sold down. It could rebound till Rs 1,100. Keep a stop at Rs 1,035 and go long. Book profits above Rs 1,090.
Mahindra Satyam
Current Price: Rs 90.45
Target Price: Rs 80
The stock has crashed on very high volumes on new revelations about the scam. If it closes below Rs 90, it is likely to fall till 80. Keep a stop at Rs 93 and go short. Increase the position below Rs 88 and cover the position below Rs 80.
(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)
