The market continued to participate in a world-wide bear-market rally. The Nifty closed at 2,807 points for a gain of 4.1 per cent while the Sensex closed up 2.4 per cent at 8,966 points. The Defty shot up by 6.5 per cent as the rupee recovered sharply from lows.
Breadth improved with advances outnumbering declines. Volumes remained low however even though both FIIs and domestic institutions were net buyers. The broad BSE 500 was up by 3.1 per cent and the Nifty Midcaps rose over 5 per cent.
Outlook: Settlement week commences with the market interestingly poised. Technically, the signals could be interpreted as going in either direction. A downside bias is somewhat more likely, certainly if the perspective is extended by 10 sessions. Either way, both volumes and volatility is likely to be up next week.
Rationale: There is massive resistance at the current levels and above. There is good support at between 2,500 and 2,600. A breakout past 2,850 will set up targets of 3,100-plus. A fall from current levels will lead to a test of 2,500. The major trend is down. There has been no volume expansion and profit-booking was evident on Friday. Elections are around the corner. A fall seems more likely than an upwards breakout.
Counter-view: Whatever their reasons, FIIs and domestic funds have been consistent buyers through the past fortnight. If that trend continues, the market will go up. There is a chance that the market will stay firm until the elections (and full-year results) are underway. A close above 2,850 would certainly be cause for optimism.
Bulls & Bears: This is the sort of situation where most stocks tend to move in the same direction. However, in the typical bear-market rally the most-beaten down stocks make the sharpest gains. Stocks in the metals, real estate and oil and gas sectors have been among the bigger gainers of the past week.
The short squeeze in Akruti City appears to be over though it will have continuing repercussions and DLF and Unitech have also hit barriers. Among metals, Hindalco and Sail looked capable of continuing the run a little longer.
Banks and IT have also done well and so have auto and auto-ancillaries. The problem is that there are very few apparent breakouts. Most stocks hit serious resistances on Thursday or Friday and look to be losing ground.
Among heavyweights, Reliance, ICICI, SBI, Bhel, Educomp and L&T all showed weakness by Friday afternoon. This reinforces the feeling that shorts are more likely to be profitable than long positions and that the market is more likely to travel down.
MICRO TECHNICALS
AXIS BANK
Current Price: Rs 342
Target Price: Rs 325
The stock has reacted sharply from resistance at Rs 360. It has some support at the current level but, it is more likely to drop till around Rs 320-325 where it should consolidate. Keep a stop at Rs 347 and go short. Start covering below Rs 330.
CESC
Current Price: Rs 194
Target Price: Rs 205
The stock appears to be close to a reliable support after it has been sold down from around 215. It has the potential to trade up to around Rs 205-210 again. Keep a stop at Rs 191 and go long. Cover above Rs 205.
EDUCOMP
Current Price: Rs 1,914
Target Price: Rs 1,570
The stock has a history of trading up to the Rs 2,000 level and then collapsing back to around Rs 1,550 on the reaction. This could happen again though there is some support at around Rs 1,750. Keep a stop at Rs 1,950 and short with an initial target of Rs 1,750. If it closes below Rs 1,750, hold the position until Rs 1,570.
HINDALCO
Current Price: Rs 48
Target Price: Rs 52
The stock has seen buying on expanding volumes. It runs into serious resistance at around the Rs 53 mark. Keep a stop at Rs 44 and go long. Start booking profits above the Rs 51 mark. If it closes below Rs 44, consider going short with a target of Rs 38 and a stop at Rs 46.
RELIANCE INDUSTRIES
Current Price: Rs 1,339
Target Price: Rs 1,295
The stock has hit a lot of resistance between Rs 1,345-1,360 and started travelling down. It has a likely target of Rs 1,295 and support between Rs 1,290-1,300. Keep a stop at Rs 1,350 and go short. Cover below Rs 1,305.
