The market zoomed to a new high and then consolidated inside a very narrow range. The Nifty closed at 4,829 points on Friday, up 3.19 per cent, after hitting a new 2009 high at 4,889. The Sensex was up 3.66 per cent at 16,264 points. The Defty gained 3.8 per cent with the rupee up substantially.
Advances comfortably outnumbered declines and breadth was good in terms of traded shares. However heavyweights outperformed smaller scrips with the Mid-caps gaining only 0.6 per cent while the BSE 500 rose 2.67 per cent. The Bank Nifty delivered an outstanding 6.3 per cent return. Both domestic institutional investors (DII) and foreign institutional investors (FIIs) were buyers but the latter bought with far greater enthusiasm. Volumes eased towards the end of the week after being high in the initial sessions.
Outlook: We may see a pullback in the early part of next week with support between 4,700-4,750 being tested. The upside is apparently limited by massive resistance between 4,825-4,900 as well as higher up. The long-term trend remains firmly bullish. The intermediate trend has been up for around eight weeks and may be close to maturity.
Rationale: The new 2009 high and a rising 200-day moving average (DMA) together confirm the strong long-term uptrend. However, the short-term trend looked weak on Friday with volumes tapering at higher levels.
Counterview: The current trading zone of 4,775-4,850 is too narrow to be sustainable so a breakout must occur. Support at 4,700-4,750 should be fairly solid and the intermediate trend would only come into question if that is broken. On the upside, volume expansion would be required to break past apparent resistance in the 4,800 and 4,900 zones. The DIIs could tip the balance since they have the resources to buy in greater quantity.
Bulls & bears: Banks were the standout performers this week on what seemed to be a technical bounce after several weeks of underperformance. This was at least partially driven by a focus on PSU banks, where more disinvestment is expected. Other PSUs also gained with the exception of refiners. The CNXIT also registered a net gain despite the stronger rupee. Wipro, Infosys and HCL Info all looked strong.
Metals were also among the lead performers with Hindalco leading the way. L&T, Patel Engineering and GVK were among several engineering and construction outfits that saw bullish support. The losers on Friday included the entire real estate sector and most refining stocks as well as metal scrips like Sterlite. If the market does see a short-term downtrend, selling in these sectors could intensify.
MICRO TECHNICALS
GE Shipping
Current Price: Rs 272.5
Target Price: Rs 300
The stock may be in the relatively early stages of a turnaround. It’s climbed above its 200 day average and established a pattern of higher peaks and bottoms. It’s sitting at a good support after testing resistance at the Rs 300-level. It’s likely to bounce back to Rs 300 again. Keep a stop at Rs 265 and go long.
Guj NRE Coke
Current Price: Rs 66.3
Target Price: Rs 80
The stock has made impressive gains on strong volumes. It has just cleared a critical resistance. There is some more resistance around Rs 70-71 but if that is cleared, Guj NRE could ride till around the Rs 80-mark. Keep a stop at Rs 64 and go long. Increase the position as and when the stock closes above Rs 71.
DLF
Current Price: Rs 398.55
Target Price: Rs 375
The stock has been sold down on high volumes, which is a danger signal. It has reasonable support at the current price and down to around Rs 390. However, if it closes below Rs 390, it is likely to fall till around the Rs 375-mark. Keep a stop at Rs 403 and short. Increase the position below Rs 390 and cover at Rs 375.
PNB
Current Price: Rs 715
Target Price: Rs 745
The stock has moved up from a base at around Rs 660 on somewhat increased volumes. It broke a key resistance at Rs 705. Projections suggest a target of Rs 740-750 is possible. Keep a stop at Rs 705 and go long. Start covering the position above Rs 740.
Hindalco
Current Price: Rs 124.4
Target Price: Rs 135
Heavy buying in the past week has driven the stock to a 52-week high. One can project a target of Rs 135 if the volume pattern is maintained. Keep a stop at Rs 120 and go long. If the stock closes above Rs 128, increase the position. Book profits above Rs 135.
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