The market looks well poised to leap forward after a decisive break-out from a long period of rangebound trading
The market turned definitely bullish with action in the mid/small caps segments triggering an upmove across the board. The Sensex ended at 3056.58 points with a gain of 3.61 per cent. The Nifty was up 3.76 per cent at 973.10 points. The Defty showed a gain of 3.95 per cent as the rupee continued its uptrend.
Breadth indicators were much better. Volumes improved markedly in midcaps although pivotal-volumes didn't show that much rise. The broad-based BSE 500 showed the effects dramatically by rising 5.74 per cent on higher volumes.
The ratio of advances to declines was positive by a healthy margin. The Put-Call ratio was down to 0.45, more bullish than previously, though still within neutral zone.
Outlook: The market appears to have finally broken out of a long period of range-trading that started around April 11. It now has an upside target of Nifty 1010/Sensex 3130 to be achieved within the next 3-4 weeks.
We could expect a minor reaction early this week however. There is support around Nifty 960/Sensex 3015 levels and any profit-taking should stop close to those levels. The upwards momentum should now be fairly strong after a significant breakout.
Rationale: A breakout from a trading range that lasted over a month generally signals a strong trend. In the longer-term, the market has finally broken a pattern of lower tops that started post-Budget. The end of a 10-week long intermediate downtrend, should be followed by around 6-12 weeks of rising prices.
Counter view: The breadth indicators did improve in support of this breakout. But the trading pattern is skewed with most of the interest centered in relatively smaller counters. This could mean a muted index move, or even a further reversal.
Watch the Nifty 960/ Sensex 3005 levels. Any close below that would imply a false breakout, although there is further robust support at Nifty 945.
Bulls and Bears: There was bull interest across most old economy scrips. While some smaller bank scrips saw profit-taking, SBI and ICICI Bank kept moving ahead. Power equipment companies like Siemens, BHEL and ABB could be a new target for bull traders.
The list of other rising large-caps includes Adani Exports, Arvind Mills, Asian Paints, GE Shipping, Hero Honda, ITC, Nocil and Raymond.
Tech stocks were less impressive although Satyam and Wipro showed some signs of bullishness. Second and third rank speculative IT shares moved up sharply, however
