The confidence vote sparked a massive but short lived jump in prices. The Nifty hit a high of 4539 before sliding down a steep slope to close at 4311.85 points for week-on-week gains of 5.37 per cent.
The Sensex hit a high of 15130 before settling back to 14274 for a gain of 4.69 per cent. The Defty rose 6.7 per cent as the rupee strengthened a lot.
Volumes improved but breadth signals remained negative with declines ahead of advances. Outside the charmed circle of liquid counters, many small stocks moved negatively. The Junior was up over 9 per cent while the Midcaps 50 rose 10.38 per cent. The BSE 500 was up 5.84 per cent. The FIIs were net buyers while local funds were sellers. Sentiment worsened on Friday after the blasts in Bangalore.
Outlook: We will probably see the Nifty seek support at 4250-4275 in the first couple of sessions next week. The settlement could trigger covering that pushes the Nifty back up till around 4550. One likely scenario is range-trading with extremely high intra-day volatility between 4250-4550.
Rationale: The net rise in prices coupled to volume expansion suggests that the intermediate downtrend that started in early May has ended. But the long term trend is definitely negative – narrow concentrated trading and bearish AD ratios are clear signals. The short-term trend is also down – a very high VIX shows that. If support at 4250 holds, higher troughs and peaks will confirm the intermediate trend reversal.
Counter-view: The short-term signals are negative and if the 4250 support breaks, the downside target could be 4100. On the upside, a breakout would set up potential targets of 4650 – that may come if shorts build up and are covered on Thursday.
Bulls & bears: The most noteworthy trend is that of speculative bullishness in a host of PSU stocks across the refining and energy space such as Bongaigaon, MRPL, Neyveli, Petronet and PGCIL. This persisted. The initially biggest movers were the ADAG scrips, such as Reliance Capital, RNRL, RelPower and even Adlabs. However, these saw sharp selloffs towards the weekend only RCOM held its ground.
Bank scrips also did well towards the beginning of the week and the BankNifty gained 9.8 per cent overall. But the sector plummeted on Friday. ICICI Bank lost a lot of ground and so did several other majors. Reliance Industries turned massively bearish on Friday after Q1 results.
Apart from RIL, banks and the ADAG group, most IT stocks contributed to the sell off. Engineering majors like L&T and ABB also lost ground.
But there were strong pricelines scattered across the entire industry space such as 3iInfotech, Renuka, Sterling Biotech, United Phosphorus, JP Hydro and India Cement. Hind Unilever and ACC also looked perky even on Friday.
MACRO TECHNICALS
Bongaigaon Refinery
Current Price: Rs 60.6
Target Price: Rs 75
There’s been a huge build-up of speculative interest driven by potential merger ratio calculations with IOC. There’s a lot of resistance at 62-63, just above the current price. If that resistance is crossed, the target could be about 75. Keep a stop at 57 and go long.
India Cement
Current Price: Rs 150.25
Target Price: Rs 175
There’s been a lot of open interest build up in the F&O segment. The stock is testing key resistance between 150-155. If it closes above 155, it could move till the 175 mark. Keep a stop at 147 and go long. One danger is settlement – if the long positions are dissolved. But carryover seems to be good.
ICICI Bank
Current Price: Rs 656.75
Target Price: Rs 630, 690 (range-trade)
The stock is at a critical support. If this breaks, it will drop till around 620 and this seems likely to happen, intra-day at the least. If it doesn’t close below 650, the stock will recover till 690 levels. Keep a stop at 665 and go short. Cover at 620. If 665 is broken, go long with a target of 690.
JP Hydro
Current Price: Rs 54.05
Target Price: Rs 64
A sharp rise coincided with higher volumes. There’s resistance at 56. If that is crossed and the stock closes above 56, it could have a target of 64. Keep a stop at 52 and go long. It may be worth pyramiding and adding to the long position above 56.
Neyveli Lignite
Current Price: Rs 120.9
Target Price: Rs 130
The stock saw a bullish engulfing on Friday where the high-low was much greater than in the previous session and the stock rose on strong volumes. It should test resistance at 130. On the downside, there is support at 115 and 112. Keep a stop at 115 and go long.
(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)
