Breadth and background indicators were poor. The BSE 500 was down 0.1 per cent and the Midcaps were down 0.4 per cent while the Nifty Junior was down 0.5 per cent. Advances were outnumbered more than 4:1 by declines. Volumes were low and many smaller stocks weren't traded at all. The FIIs were moderate buyers while domestic institutions were net sellers.
Outlook: The market is in another short-term downtrend and it is likely to test support between 4,650 and 4,750 again. In all probability the next 5-10 sessions will see range-trading between 4,650 and 4,950 with a fair amount of intra-day volatility. We will get a clearer picture of the direction of intermediate and long-term trends over the next week.
Rationale: The short-term signals are negative and the market is not yet oversold enough to trigger a technical bounce on Monday. The last bottom was 4,675 on February 8. That was just above the 200 Day Moving Average, which suggests the long-term bull market is still intact. If the next bottom is at, or above 4,675, the pattern of higher lows would suggest that the intermediate downtrend, (which is now in week 6), is changing. A close below the 200 DMA (between 4,670 and 4,720 depending on calculation mode) would, on the other hand, suggest the long-term trend has gone bearish.
Counter-view: There is bound to be some short-covering and speculative buying immediately pre-Budget in settlement week. If the market does climb past 4,929 on the upside, we will have a pattern of higher highs, which would again signal an improving intermediate trend. The market is unlikely to “make up its mind” before the Budget so, range-trading between roughly 4,650 and 4,950 seems the most likely pattern until settlement.
Bulls and Bears: Most sectors fell last week and stocks outside the F&O ambit suffered from lack of liquidity as well. Trader should stay out of all but the largest scrips in this situation. Metals and realty were especially badly affected by selling. Sugar also saw a lot of selling. Telecom was hard-hit by a combination of poor quarterly results and Bharti's Zain deal, which was considered cause for selling by many operators.
Banks and IT were outperformers, with the Bank Nifty and CNXIT indices both up by over 1 per cent. But both sectors looked weak by Friday. There was some defensive buying in pharma and some speculative buying in energy stocks.
As things stand, a lot of pivotal scrips are sitting close to critical supports. Given the poor breadth signals, the chances are, some will crash. In other cases, profit-booking and renewed buying could trigger a bounce but that is more likely to occur close to settlement.
MICRO TECHNICALS
Bharti Airtel
Current price: Rs 278.80
Target Price: Rs 255
The stock has broken key support at Rs 300 on heavy selling and could be heading for a multi-year low at around Rs 255. There is some support at Rs 275-280 and again at Rs 265. Keep a stop at Rs 285 and short. Cover 50 per cent of the position at Rs 265 and reset the stop loss to Rs 270. Clear the position at Rs 255.
SBI
Current price: Rs 1,905
Target Price: Rs 1,850
The stock has been sold down to a critical support. If SBI closes below Rs 1,900, it will fall to Rs 1,850 and maybe lower, to Rs 1,800. Keep a stop at Rs 1,920 and short. Increase the position below Rs 1,900. Book 75 per cent profit at Rs 1,850 and reset the stop to Rs 1,860 with a new target of Rs 1,800.
Bharat Forge
Current price: Rs 243.65
Target Price: Rs 265
The stock has been sold down to a strong support. It has the potential to bounce back till around the Rs 265 level. Keep a stop at Rs 240 and go long. Book partial profits at Rs 255 and reset the stop loss till Rs 250. Clear the position at Rs 265.
HDIL
Current price: Rs 302
Target Price: Rs 320
The stock has found firm support at the current price and it could easily make a technical recovery till the Rs 320 mark. Keep a stop at Rs 295 and go long. Book partial profits at Rs 314 and reset the stop to Rs 310. Clear the position above Rs 320.
(The target price and projected movements given above are in terms of the next five trading sessions unless otherwise stated.)
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The Sensex after touching a low of 16,011, rallied to a high of 16,481. It slipped later and settled with a marginal gain of 39 points at 16,192. Other major global markets such as the US, Hong Kong, Japan and China were shut during the week for a day or two. In fact, China and Taiwan were shut throughout the week.
Among the index stocks — Hindalco surged over 8 per cent to Rs 150, and HDFC Bank rallied 6.5 per cent to Rs 1,700. Tata Steel, HDFC and Hindustan Unilever were the other major gainers. On the other hand, Bharti Airtel slumped 11.5 per cent to Rs 278. Reliance Infrastructure, DLF, Reliance Communications, Reliance and Sterlite were the other prominent losers this week.
Given the fact that we are headed to a week which will be dominated by the expiry of the February derivatives series and the Union Budget, predicting the direction of the market will be all the more difficult. One needs to be prepared for high volatility and keep an eye on key levels. The best strategy is to stay put till uncertainties vanish.
The Sensex is currently below its short-term moving average both on daily (20-day) and weekly (20-week) charts. The short-term moving average on the daily chart is at 16,240, while the short-term weekly moving average is at 16,784. The bias will remain down as long as the index trades below its short-term weekly moving average.
Although the Sensex has near support at 16,000, one needs to carefully watch 15,900 as a key level, for a break below 15,900 could trigger a free fall up to 15,300 at least.
The NSE Nifty moved in a range of 146 points, from a low of 4,784, the index moved up to a high of 4,930, and finally closed with a gain of 18 points at 4,845.
Next week, the Nifty is likely to face resistance around 4,900-4,918-4,935, while it may seek support around 4,813-4,772-4,755.
The daily short-term moving average of the index is at 4,854, and the short-term weekly moving average is at 5,001. The long-term (200-day) moving average on the daily chart is at 4,719, and the weekly long-term moving average at 4,200.
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