The market gained through settlement week albeit every session saw enormous volatility. The Nifty closed up 2.36 per cent at 4,413.5 points while the Sensex was up 2.67 per cent at 14,657. The FIIs were net sellers (till Thursday) and domestic institutions were buyers. The Defty gained 2.19 per cent as the rupee lost a little ground.
Breadth signals were quite good. Advances outnumbered declines. Volumes rose markedly even making allowances for settlement considerations. Smaller stocks did well although the focus was naturally on F&O. The Junior was up 2.59 per cent and the BSE 500 was up 2.44 per cent.
Outlook: The short-term trend seems positive albeit volatile. The test of the intermediate trend will come as it runs into resistance just above the current level.
If it crosses the previous intermediate top of 4,539, the positive intermediate trend will be confirmed. On the downside, there’s support running all the way down to 4,180.
Rationale: The continuing rise post-settlement suggests that there is some optimism. Daily trading continues to be extremely volatile. The week’s low of 4,190 on Tuesday actually established a pattern of lower lows, before the bounce on Wednesday.
Hence the intermediate trend is in some doubt. If the market does break above 4,540, the higher tops would be confirmation of bullishness.
Counter-view: Much of the optimism is being generated by operators rather than institutions and that is fickle in nature. The very high volatility and high implied volatility is a negative divergence in relation to the price-trend. There is a possibility that we will see range-trading between 4,200-4,500 rather than a breakout in either direction.
Bulls & bears: The IT sector was a major contributor to the gains with the CNXIT up 5.3 per cent. Apart from Wipro, stocks such as Rolta, Mphasis and I-flex looked interesting.
Bank shares were muted by the repo hike and the BankNifty gained only 0.75 per cent though most of it came on Friday. PSUs were favoured and PNB and Corporation Bank could be the best movers if the revival continues.
Agro stocks did well in general and sugar in particular with Bajaj Hindustan, Balrampur Chini, Renuka and Triveni up along with gainers such as Chambal Fertiliser, Nagarjuna Fertiliser and United Phosphorus.
Apart from this, winners were scattered across industries and included Escorts, Essar Oil, Gail, GMR Infra, Jet, JP Hydro, JP Associates, Punj Lloyd, Sesa Goa, Tata Chem and Tata Steel. Most of the Reliance and ADAG stocks did well but RCom saw massive selling.
MICRO TECHNICALS
Gail
Current Price: Rs 390.85
Target Price: Rs 420
The stock has seen good volumes and its testing the top end of a trading range. If it can close above Rs 400, it has the potential to move till the Rs 420 levels. On the downside, there is good support at Rs 380. Keep a stop at Rs 380 and go long. Pyramid and add to the position if Rs 400 is cleared.
Balrampur Chini
Current Price: Rs 88.90
Target Price: Rs 98
The stock is testing major resistance at Rs 90. If it closes above Rs 90, it will move till around Rs 98. On the downside there is good support at Rs 85. Keep a stop at Rs 85, go long. Start covering the position above Rs 96.
RCom
Current Price: Rs 436
Target Price: Rs 400
The stock made a downside breakout with a massive volume expansion and a 10 per cent drop on Friday. It has hit reasonable support but there is a probable downside till support between Rs 400-410. Keep a stop at Rs 445 and go short. Cover below Rs 410.
Tata Steel
Current Price: Rs 679.95
Target Price: Rs 720
The stock has seen a sharp rise from Rs 580. It has the potential to reach Rs 720 if the volumes are maintained. However, there is a major resistance at Rs 700. Keep a stop at Rs 670 and go long. Clear the majority of the position at Rs 700. If the stock falls below Rs 670, it could drop till Rs 645. Bear that in mind.
(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)
