Downside breakout could test 4,800

Downside breakout could test 4,800

Outlook: The short term trend is bearish and the Nifty is likely to test 4,950 again at the very least. If it falls below 4,950, it could hit 4,800. Expect high daily volatility and high volumes as well since this is settlement week. The daily range could be 150 points.

Rationale: The market made a decisive downside breakout when it closed below 5,150 on Thursday – the breakout was confirmed by volume expansion. That drop set up a likely target of 4,950, which was fulfilled intra-day on Friday. If support at 4,950 is broken, the next reliable support is 4,800. If the market falls below 4800, an intermediate trend reversal would be confirmed.

Counter-view: In terms of time, an intermediate uptrend has been in force since end-November. A trend reversal would be quite likely and in that case, the market could dip till it hits support in the range of 4,750-4,700. The other possibility is that short-covering close to settlement could trigger a sharp recovery that pulls the market back above 5,180. That would be a positive signal but it would need to be backed by breadth (positive advance-decline lines) and strong volume action to make it valid.

Bulls & bears: This is results season so action will always be somewhat stock-specific. Reliance and Airtel did well on good results while L&T saw selling after it posted poor results. In fact, most major sectors saw heavy selling. The CNXIT lost a lot of ground despite the weaker rupee – Tech Mahindra was the only remotely bullish stock by Friday’s close. TCS, Wipro and Infosys were all looking weak.

Financials were also down with the Bank Nifty losing somewhat less than the market but most bank stocks closed bearish. Pressure on bank stocks could intensify next week. Metals, real estate and engineering-construction counters were sold heavily. If a quick recovery occurs in these sectors, it will be due to a combination of short covering and carryover buying. FMCG companies such as ITC and HUL saw some defensive buying. Some PSUs like REC and Concor could also see speculative buying in the hope of an IPO or FPO. A couple of auto and auto ancillary stocks could also move against the overall trend.

MICRO TECHNICALS

Hindustan Unilever
Current Price: Rs 257.95
Target Price: Rs 270

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The stock is resting on good support between Rs 250-257. It has the potential to climb till Rs 266-270 at least since it’s perceived as a good defensive holding during bearish phases. Keep a stop at Rs 252 and go long. Start booking profits above Rs 266.

Reliance Industries
Current Price: Rs 1,053
Target Price: Rs 950

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The stock is very delicately poised at support between Rs 1,030-1,050. If it closes below Rs 1,030, it could drop till around the Rs 950 level. Keep a stop at Rs 1,070 and go short. Increase the position between Rs 1,030. Book profits below Rs 970.

Unitech
Current Price: Rs 79.35
Target Price: Rs 72

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The stock has been testing support between Rs 77-80. If it closes below Rs 77, it is likely to drop till around Rs 72. Keep a stop at Rs 82 and go short. Increase the position below Rs 77. Start booking profits at around Rs 73-74.

Shree Renuka
Current Price: Rs 220.95
Target Price: NA

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The stock is consolidating close to a recent low. If the support between Rs 215-220 holds, it has the potential to recover till around the Rs 240 levels. Keep a stop at Rs 215 and go long. Book partial profits at Rs 230 and clear the position at Rs 240.

Punj Lloyd
Current Price: Rs 186.10
Target Price: Rs 170

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The stock has made a downside breakout on high volumes. It’s likely to fall till the Rs 179 level at least and it may slide till around Rs 170. Keep a stop at Rs 190 and go long. Book partial profits at Rs 179 and revise the stop to Rs 180.

(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.

Sustainable recovery 25-JAN-10 The superlative December quarter results from the Big Three IT companies renewed hopes that the worst is over for the IT sector.

Many delivery hurdles to cross 25-JAN-10 While the scope for third-party logistics is robust, maintaining its margins will be a tough act for Aqua Logistics.

Regional focus 25-JAN-10 While Vascon Engineers’ EPC capabilities provide comfort, success in the real estate business will depend on the company’s ability to scale it up.

Expanding MF reach 25-JAN-10 The industry has been abuzz with news of mutual funds being available through stock exchanges for transacting.

Disappointing show 25-JAN-10 While L&T’s December quarter results and cut in its 2009-10 guidance are disappointing, most analysts believe it to be a blip.

'2010 may not favour top down investing' 25-JAN-10 In the second series of interviews, Phani Sekhar talks about the markets in 2010, the sectors to bet on and his portfolio.

Markets at a glance 25-JAN-10 A sell-off in global stocks and disappointing earnings numbers from a few big corporates pulled down the key indices during four out of five trading sessions in the week.

Analysts' corner 25-JAN-10 ONGC’s Q3 FY10 revenues were up 23.1 per cent y-o-y to Rs 15,310 crore on account of higher crude prices and realisations on value added products, and lower subsidy.

Down move on high volumes, volatility 25-JAN-10 A downside breakout with only three sessions left for the settlement has left the market in turmoil.

Downside breakout could test 4,800 25-JAN-10 The market crashed in the last two sessions with the Nifty bouncing from 4,955 level to close at 5,036 points for a week-on-week loss of 4.12 per cent.

Not shining through 25-JAN-10 Small size and limited presence reduce the appeal of Thangamayil Jewellery’s IPO.

Still in the trial phase 25-JAN-10 While Syncom Healthcare has big plans to expand, it is a high risk bet considering its short track record and inexperience in overseas markets.

Analysts Picks: TCS, JSW Steel, IVRCL Infra, Maruti Suzuki

Market volatility may spike ahead of top results, RBI policy

Heard on the Street

Src: ET, Business-Standard

Week Ahead: Another test of support at 3,800

Week Ahead: Another test of support at 3,800

If the market closes below 3,715, it could lose another 200 points landing between 3,500-3,550.

A pattern of crash, recovery and another crash saw the Nifty back at 3,818 points for a week-on-week loss of 4.19 per cent. The Sensex eased to 12,526 points for a loss of 4.39 per cent. The Defty was down 5.19 per cent with the rupee diving below the 47 mark.

Volumes were low and declines outnumbered advances by a hefty margin. The FIIs were massive sellers which contributed to pressure on the rupee. Indian institutions were token buyers. The Nifty Junior lost 4.47 per cent while the Midcaps 50 lost 5.33 per cent and the BSE 500 lost 4.78 per cent. Incidentally both Sensex and Nifty hit respective 52-week lows of 12,153 and 3,715.

Outlook: Prospects are bearish. But it’s possible that support at the current levels will hold. If so, the Nifty will range-trade between 3,715-4,150. If the market closes below 3,715, it could lose another 200 points landing between 3,500-3,550.

Rationale: The new lows confirmed an intermediate downtrend is in force. The breach of support at 3,800 on intra-day basis also suggests that sellers are becoming more powerful than buyers at that level. This makes it likely the market will make a downside breakout with a target projected to 3,500.

Counter-view: The intermediate downtrend has been in force since mid-July when the market hit a peak of 4,650. Since then, it’s been lower highs and lower lows. After six weeks, the downwards momentum may ease, though this is unlikely in a long-term bear market. If the market does trade up but it will run into resistance between 4,000-4,150. A serious recovery is most likely closer to settlement when short covering would be present.

Bulls & bears: Metals were among the worst performing sectors in a week when around 1,000 stocks touched their respective 52-week lows. Tata Steel, Sterlite, Sail, Nalco, Jindal and Hindalco all did badly. Banks saw wild swings after ICICI was the target of rumours of bankruptcy and other bank stocks also saw selling followed by recovery. The Bank Nifty eventually lost just 0.6 per cent.

FMCG majors like HUL, ITC and Colgate held their ground. Pharma stocks such as Dr Reddy’s, Sun Pharma and Lupin did well and even Ranbaxy looked to have bottomed. Real estate and other rate sensitive stocks such as automobiles, financial institutions and NBFCs generally lost ground.

However two-wheelers like TVS and Hero Honda did much better than four wheelers. The IT industry continues to suffer from fears of US recession and the CNX IT lost 3.3 per cent. The trader’s choices next week vary from shorts, to stocks that may be bottoming, to the odd defensive holding.

Hind Unilever
Current Price: Rs 256.7
Target Price: Rs 265

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Despite a reduction in trading volumes, HUL has held its price gains in a weak market. It may have completed a breakout when it closed above Rs 255. The stock has a potential upside till Rs 265 and a downside till around the Rs 245 levels. Keep a stop at Rs 250 and go long.

ICICI Bank
Current Price: Rs 504.35
Target Price: Rs 550

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The stock saw amazing gyrations between a low of Rs 460 and a high of Rs 565 as it generated high volumes. It has support close to the current price and is most likely to settle into range trading between Rs 500 and Rs 560. Keep a stop at Rs 495 and go long, intending to book profits above Rs 545. If Rs 495 is broken, the next support is Rs 480.

Lupin
Current Price: Rs 770.2Target Price: Rs 810

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The stock has made an upwards breakout on a volume expansion. It faces resistance between Rs 770 - Rs 780 and it has a possible upside till the Rs 810 levels. Keep a stop at Rs 760 and go long. Be prepared to wait up to 10 sessions while it traverses Rs 770 - Rs 780.

Tata Steel
Current Price: Rs 393
Target Price: Rs 380

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The stock has made a downside breakout on heavy volumes. It has a target projection of Rs 380 and this may be exceeded due to high volume. However, any pullback is likely to lead to a bounce till the Rs 420 levels so, there are risks involved in going short. Keep a stop at Rs 400 and go short. Book partial profits at Rs 380. If the Rs 400 stop is broken, go long with a target of Rs 420 and a stop at Rs 395.

TVS Motor
Current Price: Rs 35.65
Target Price: Rs 42
The stock is testing resistance at Rs 36 and if it closes above Rs 36.5, it is likely to have a target of Rs 42. Volumes have been on the high side, which is a good sign in a breakout situation. Keep a stop at Rs 34.5 and go long. Increase the position between Rs 36.5 and Rs 37.5.
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INVESTOR GUIDE frm ET

Bank, energy stocks ease blow for MFs6 Oct, 2008, 0549 hrs IST
NAVs of actively managed diversified stock funds slumped in September, but most of them outperformed the benchmark stock index, cushioned by cash and a softer fall in bank and energy stocks.

The bear grip tightens 6 Oct, 2008, 0546 hrs IST, Deepak Mohoni
The indices remain in the intermediate downtrend which started from the BSE Sensitive Index’s September 8 high of 15,107.

Pressure continuously mounting on Nifty 6 Oct, 2008, 0543 hrs IST, Shakti Shankar Patra
The pillar on which the five-year bull market was built - something that had come to the Nifty’s rescue even during the current crisis - is now busted.

Hedge, private equity funds head for the rocks 6 Oct, 2008, 0534 hrs IST
Forced deleveraging and potential global recession mean the whole range of alternative investments, including real estate and commodities, are very vulnerable.

Hindalco's rights issue: A good investment opportunity 6 Oct, 2008, 0528 hrs IST, Santanu Mishra
Strong fundamentals and a good offer price make Hindalco’s rights issue a good investment opportunity. But if its share price falls well below the offer price, investors will be better off buying the stock from the open market

Even dividend can generate better returns 6 Oct, 2008, 0525 hrs IST, Karan Sehgal
Investing in select stocks from a purely dividend point of view can generate better returns in the long run than investing in the seemingly high interest-paying fixed deposits

Ipca Labs contemplates huge expansion plans 6 Oct, 2008, 0518 hrs IST, Kiran Kabtta
Ipca Labs has an integrated business model with huge expansion plans. Investors can consider the stock based on its growth & value prospects

Good time to begin systematic investing 6 Oct, 2008, 0513 hrs IST
It is too early to make positive predictions about the tsunami that has hit global financial markets. But as things get back to normal slowly, the surroundings will change for the better. This is a good time to begin systematic investing.

Slowing economy may offer respite to retail sector 6 Oct, 2008, 0507 hrs IST, Supriya Verma Mishra
A slowing economy may offer some respite to the domestic retail sector. Falling rentals now provide a glimmer of hope to players who are on an expansion overdrive and experimenting with new formats

The grim scenario of Rupee 6 Oct, 2008, 0500 hrs IST, Ramkrishna Kashelkar
From moving in a fairly stable range over the past three years, the rupee suddenly finds itself swerving around in a rather rocky terrain.

Source: Economic Times, Business standard.

Week Ahead: Market likely to test support at 3,800

Week Ahead: Market likely to test support at 3,800

The market nosedived after a quiet settlement. The Nifty closed at 3,985.25 points for a loss of 6.12 per cent while the Sensex lost 6.69 per cent to close at 13,102. The Defty was down 7 per cent in a week when the rupee slid to 46.4. The FIIs continued to be net sellers while the domestic institutions were marginally negative until the settlement day.

Volumes were low and carryover moderate. Declines far outnumbered advances. Every sector of the market was hard hit. The Junior lost 6.5 per cent while the Midcaps 50 lost 6.9 per cent and the BSE 500 lost 6.09 per cent. The CNXIT lost a disproportionate 12 per cent and the Bank Nifty lost 7.7 per cent.

Outlook: The breach of support at 4,000 means that the support at 3,800 is very likely to be tested again next week. It is quite likely that it will be broken this time. Every indication is that we are in an intermediate downtrend and the combination of low volumes and adverse breadth could be toxic.

Rationale: The market held its ground until settlement because that was a trigger for short-covering. No such trigger exists in a brand-new settlement.
All the other signals are negative and even if the market is over-sold, it could drop further. This seems to be the early stages of an intermediate downtrend and the market trends are in “phase” with both the short-term and long-term trends running negative as well. That means strong downwards pressure.

Counter-view: The weakness is basically due to global cues. If there is a confidence boost in the US, that would contribute to a turnaround in sentiment. There’s support at 3,950 and 3,900 and 3,850. There could be rallies from any of these points. However, even if there are small rallies at those points, a full reversal doesn’t seem likely. There will be powerful upside resistance at 4,050 and beyond that, between 4,150 and 4,180.

Bulls & bears: The advances-declines ratios have been overwhelmingly negative. There are no obviously bullish stocks in the F&O space and stocks outside that universe are mainly negative and also lack liquidity at the moment. The IT, banking and real estate sectors have been amongst the worst hit but every sector has lost ground.

FMCG is a traditional haven in times of trouble and it has been among the better performers with ITC, Dabur, Colgate, HUL all holding their ground. Apart from these, there were a few isolated winners such as Sun Pharma, Sesa Goa, Tata Communications and HCL Infosystems. Keep tight stops if you go long.

The bulk of the market, that is, almost 90 per cent of NSE listings lost ground. In such circumstances, it’s better to stick to extremely liquid stocks while trading and obviously, it makes more sense to stay on the short side. Look for stocks that seem to be still some distance off reliable supports when going for short positions.


MICRO TECHNICALS
Infosys Current Price: Rs 1,446.90Target Price: Rs 1,400
The stock has made a downside breakout and hit a support that probably will not hold. It is likely to slide till Rs 1,400 where it will hit a much stronger support. Keep a stop at Rs 1,460 and go short. Be prepared for wild swings caused by the Axon takeover battle. It has the potential for an upswing till Rs 1,510, so be prepared to trade long if the Rs 1,460 stop is broken.

Reliance Industries Current Price: Rs 1,963Target Price: Rs 1,885
The stock has slid from the Rs 2,100 level. It has some support at Rs 1,940 but it’s likely to break that and slide till it hits a band of support between Rs 1,880-Rs 1,900. Keep a stop at Rs 1,975 and go short. Start covering at Rs 1,900

Sun Pharma Current Price: Rs 1,472.5Target Price: Rs 1,490
Under less bearish market conditions, one would have hoped that the stock had an upside target of Rs 1,520 on its next upmove. That is unlikely but it should have the potential to climb till Rs 1,490. There is good support at Rs 1,460. Keep a stop at Rs 1,460 and go long.

Tata CommunicationsCurrent Price: Rs 470.85 Target Price: Rs 490
The stock has made an upwards breakout on strong volume expansion. It has a likely target of Rs 490 and it may have the strength to go further, till it hits stiff resistance at Rs 500. Keep a stop at Rs 460 and go long..
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Indiabulls Securities puts 'buy' on Power Grid Corporation29 Sep, 2008, 0443 hrs IST
Indiabulls Securities initiates coverage on Power Grid Corporation with a ‘buy’ rating.

Deutsche Bank has a ‘sell’ rating on Karnataka Bank 29 Sep, 2008, 0442 hrs IST
Deutsche Bank has a ‘sell’ rating on Karnataka Bank with a target price of Rs 115. The ‘sell’ call is based on the following parameters:

HSBC retains ‘overweight’ rating on Bharti Airtel 29 Sep, 2008, 0442 hrs IST
HSBC retains ‘overweight’ rating on Bharti Airtel with a target price of Rs 1,002.

Motilal Oswal downgrades Reliance Capital to ‘neutral’ 29 Sep, 2008, 0441 hrs IST
Motilal Oswal downgrades Reliance Capital to ‘neutral’ with a revised target price of Rs 1,340.

Macquarie initiates coverage on OnMobile Global with an ‘outperform’ rating 29 Sep, 2008, 0440 hrs IST
Macquarie initiates coverage on OnMobile Global with an ‘outperform’ rating and a target price of Rs 650.

Kotak Securities reiterates a ‘buy’ rating on Sesa Goa 29 Sep, 2008, 0440 hrs IST
Kotak Securities reiterates a ‘buy’ rating on Sesa Goa with a target price of Rs 300 per share for an investment horizon of eight months.

HDFC Securities puts 'buy' on Bartronics India 27 Sep, 2008, 0000 hrs IST
HDFC Securities has initiated coverage on the stock with a ‘buy’ rating saying the fast growing AIDC (Automatic Identification and Data Capture) technology in India will further boost the company’s order book and topline.

CLSA Research maintains 'buy' on HDFC 27 Sep, 2008, 0000 hrs IST
CLSA Research has maintained a ‘buy’ rating on the stock saying HDFC has not seen deterioration in asset quality due to rise in rates and its plans to list a couple of subsidiaries in CY09 may act as a catalyst.
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Time to test market bottom again 29 Sep, 2008, 0336 hrs IST, Deepak Mohoni
The market started falling again, with the BSE Sensitive Index finishing the week 6.7% or 940 points lower, and the Nifty ending 6.12% down.


Source:ET,BS.