Market may stay range bound

The settlement went through with the market maintaining an uptrend. The Nifty ended the week up by 2.75 per cent at 5,762.75 points with the Sensex ahead by an equivalent 2.71 per cent. The Junior was up 4.41 per cent and the CNX Midcaps gained 4.83 per cent. Breadth was fairly good and volumes were good though this is always true in settlement week but the high carryover was also a bullish signal.

The BSE 500 was up by 3.42 per cent. The overall gains were somewhat surprising since the foreign institutional investors (FIIs) were heavy sellers throughout the week and indeed the month, and mutual funds barely bought although they were net-positive.

Outlook: The market stays stuck inside the trading range of Nifty 5,400-5,850 and until there is a breakout from that range, it's difficult to call the future direction. The volume pickup this week and the decent breadth make an uptrend look more likely. But FII attitude is likely to be the key to the immediate future direction.

Rationale: There is clearly defined resistance above 5,800 and clear support at 5,400. Any breakout beyond these levels is likely to require volume expansion. That could come about either through unabated FII selling or a shift in attitude and buying. It appears operators are bullish since they absorbed last week's FII sales but they are unlikely to expand their commitments much beyond current levels.

Counterview: The volume pickup was largely driven by settlement considerations. If volume tails off, the market is likely to move down. The market's last peak came on November 14 and it's been in a downtrend or range-trading since.

The current phase has lasted just two weeks and on the basis of the time-factor, a further consolidation or downtrend seems more likely. But just as it would require much buying to break 5,800, it will require a spurt in supply to break the 5,400 support. Only the FIIs have the capacity to sell or buy sufficiently large quantities against delivery.

Bulls & Bears: There were sharp gains across several sectors. Telecom stocks such as VSNL, MTNL, Bharti and TTML all jumped on Friday. Bank stocks did well in the last two sessions with Kotak, Bank of Baroda, HDFC Bank and Indian Overseas being among the best performers. IT stocks made a general recovery with HCL Tech and Satyam among the winners, though market leaders such as Infosys and TCS remained close to annual lows.

Apart from these, the Reliance and ADAG stocks continued to generate high volumes. Essar Oil, Sterlite and Neyveli Lignite remained strong. GMR Infra and Hind Oil Exploration were two new counters that attracted bulls.

MICRO TECHNICALS

GMR Infrastructure Current Price: 255.1 Target Price: 275

The stock has completed a breakout on reasonable volumes. It has a potential target of 275 and it could exceed that, given that the long-term trend has been excellent for the past 6 weeks. Keep a stop at 249 and go long.

Hind Oil Exploration Current Price: 142.7 Target Price: 160

The stock broke key resistance at 135 on a big volume expansion. It has a likely target of 160 and some resistance at current levels. Keep a stop at 134 and go long. Book partial profits at 155. The potential long-term target is 180 plus, so it may be worth keeping a delivery position for 3-4 weeks.

Kotak Mahindra Bank Current Price: 1,233.5 Target Price: 1,275

KMB has seen what could be an important breakout past resistance at 1,175. It has an immediate target of 1,275 and a long-term target that could be quite a lot more. Keep a stop at 1,215 and go long. Book partial profits above 1,270 and hold a delivery position for 3 weeks with a perspective of 1,400. Satyam Computer Current Price: 440 Target Price: 475

The stock seems to have bottomed and is likely to trade up again until it hits resistance at 475-480. The long-term trend suggests range-trading between 400-500 will continue. Keep a stop at 430 and go long. Book partial profits at 460 and close out above 475. VSNL Current Price: 627.95 Target Price: 660

The stock made a huge jump on Friday on the basis of a big volume expansion. When it crossed resistance at 590 it set up a short-term target of 660. The long-term trend also looks to have undergone an improvement to bullish from range-trading. Keep a stop at 610 and go long.

via Business Standard