| Indices | Supp/Resis | 1 | 2 | 3 | |
 | Nifty | Resistance | 6039.22 | 6066.83 | 6116.32 |
| Support | 5962.12 | 5912.63 | 5885.02 | ||
| Sensex | Resistance | 20146.60 | 20219.54 | 20352.66 |
| Support | 19940.54 | 19807.42 | 19734.48 | ||
Sensex (20,073.6)
Market participants appeared to be going through the motions last week with thoughts already in far-off hills or beaches where they have planned that hard-earned vacation. The Sensex made some lackadaisical moves around the 20,000 mark and finally closed a per cent higher.
It would come as a surprise to many that the Indian stock market used to shut down for a week between Christmas and New Year once. Must say it made a lot of sense! But then market was functional for only two to three hours then. That was the time when our stock market moved at its own pace without the need to sprint with rest of the world.
Lack of trading interest was reflected in volumes petering down in both cash as well as derivative segment of the market. FII activity also reduced on the bourses towards weekend. Inflation will continue to bother market players next week with crude topping $90 a barrel and food inflation rising at 12.13 per cent.
Expiry of December series and an impending fuel price hike are likely to cause some ripples in an otherwise sedate week. Open interest in the derivative segment is relatively lower around 1, 65,000 crore. This denotes lesser trading interest that augurs well for market in the week ahead.
Oscillators in the daily chart continue to trudge sideways. But the weekly oscillators are hovering in the neutral zone implying that the index is at a very critical juncture as far as the medium-term trend is concerned. What is more heartening is the bullish bias in the 10-month rate of change oscillator and 14-mont relative strength index.
The guideposts for the medium-term movement in the Sensex are thus,
The index faces strong resistance in the band between 20,000 and 20,300. Inability to clear this zone will result in decline to 18,800 or even 18,000 in the beginning of 2011.
Strong move above 20,300 will turn the medium-term trend neutral paving the way for a rally towards the life-time high at 21,108. Another wobble is possible near this peak and reversal from here will pull the index down to 19,000 again.
Strong move above 21,108 will make the index rally to 23,031 over the medium-term. The medium-term trend will be roiled only on a close below 19,000.
The closing on Friday was gung-ho with Christmas cheer spilling in to stock prices. The Sensex could attempt to build on this by rallying to 20,284 or 20,545 in the days ahead. If the index fails to move beyond the first resistance, it will denote an impending decline to 19,827 or 19,740. Short-term investors can buy in declines as long as the first support holds. Subsequent supports are at 19,485 and 19,074.
Nifty (6,011.6)
The Nifty too was comatose in a narrow range between 5,900 and 6,000 last week. But it ended the week near the high, with 63 points gain. The medium-term trend in the Nifty continues to hang in balance. It has not yet moved above the strong resistance in the zone between 6,030 and 6,100. Strong close above this zone will take the index towards its previous peak at 6,338. Conversely, a reversal from below this zone can drag the Nifty down to 5,840 or even 5,624 in the days ahead.
Fresh long positions are therefore recommended only on a strong close above 6,100. Targets on a close above 6,350 remain at 6,680 and 7,270.
For the short-term, the index can attempt to move higher to 6,090 or 6,127. Aforementioned resistance in this zone can thwart rallies and drag the index down to 5,932 or 5,908 in the days ahead. Short-term traders can buy in declines as long as the index trades above the second support. Breach of this level can drag the index to 5,870 or 5,840.
Global Cues
Global markets appear to be on course to end the year on an upbeat note. Most benchmarks closed the week in positive terrain though trading was very thin in most markets. Benchmarks in Canada, Austria, Germany, Russia, and the UK and so on went to close at multi-year highs last week.
The CBOE volatility index is testing the lower end of its long-term band at 15. As we have been reiterating, a strong close below this level will mean that the equities are in a long-term bull-market.
The Dow closed 81 points higher at 11,580 last week. This is the fourth positive weekly close for this index and the short-term trend remains very strong. This index can move higher to 11,867 or 12,000 in the near term. But the medium-term target for this index is 12,573. Key support for the index is around 11,000, where the 200-day moving average is positioned. Short-term uptrend will not be under threat as long as the index holds above this support.
Crude climbing above the $90 mark last week is causing a lot of consternation. This sharp move above the $87 ceiling is a cause for concern since the next medium-term target if the commodity sustains above $87 is $97. Key long-term resistance is however a little above at $104. The New Year could be set alight by crude prices blazing higher.
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| Nifty has formed an "Ascending triangle" pattern suggesting uptrend Nifty is exhibiting "ascending triangle" on daily chart which is a bullish breakout pattern. It is moving near to upper trend line of the triangle and expecting a breakout on upside in near term. Resistance now seems at 6,023-6,040 (50 Days simple moving average) while support stand at 6,000-5,950. On upside if level of 6,040 breaches decisively then we could see rise up to the mark of 6,080. On the flip side if level of 6,000 is breaches then it could retrace down to the support of 5,950 mark. However, Technical momentum indicators (Stochastic, MACD ) are currently showing mix signals. Stochastic is currently moving in overbought zone, showing negative crossover. Another momentum indicator MACD is supporting uptrend move. MACD showing positive divergence and crossing the signal line (9 Days exponential moving average) from the below, which is a bullish signal. Moreover, Nifty has closed above 8 Day (5,969) and 34 day EMA (6,014) which also provides support for it. From here, we can expect that Nifty is likely to trade between 5,950 to 6,100 in short term.
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Looking Forward India's medium-term growth trajectory remains promising amid a still gloomy world outlook. The combined advance tax payment by top 100 corporate taxpayers rose 18.7% to Rs 27,531 crore in Q3 December 2010 over Q3 December 2009, indicating better corporate performance in the third quarter this year. Markets may take a strong bounce back from the current level as higher advance tax payment from Indian companies could lift the buying sentiment in market. The time is right to pick up fundamentally sound stocks which may have got beaten down along with their peers. Companies in sectors that are able to pass on their cost increases to consumers may enjoy greater stock market return. Further, companies focused on the domestic economy & consumption could continue to do well and get a higher rating than companies which are more depend on global sentiments. Cement, Auto, Banking, IT and Capital goods sectors could be good bet for investors.
| Daily Movement of Nifty  Daily Movement of Sensex, Net FIIs & MF investment Weekly return on BSE Sectoral Indices | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Weekly Price Movement of GDR
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Weekly Price Movement of ADR
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| US markets were up during the week (till Thursday). Initially on the options expiration day, the indices closed on a mixed note. Merger & Acquisition news lifted banking while better than expected results pushed technology stocks. Thereafter, the markets recovered and were mostly higher as some economic optimism drove buying interest. The buying interest continued and was driven by corporate news and optimism regarding the potential economic growth of US in 2011. Finally towards the end, the trade thinned and therefore resulted in a lack of reaction to the final reading on third quarter GDP and data on existing home sales. Looking ahead, in final week of the year, data on jobless claims, consumer confidence and pending home sales is likely to be in focus. Asian stocks traded with a negative bias during the week. The markets tumbled at the beginning of the week on concerns regarding geopolitical tensions between two Korean countries after the news that South Korea is pushing ahead with a US backed artillery test, prompting an emergency session of the U.N. Security Council. The sentiment in the asian markets was also dampened on concerns that Europe's debt crisis will spread after Moody cut Ireland's credit rating. The markets recovered slightly backed by strength in resource companies and eased military tensions on the Korean peninsula. Moreover, Bank of Japan kept the key interest rate and the asset purchase program's size unaltered and also reported to buy assets and provide long- term funds. The markets ended the week on a negative note as investors were cautious ahead of Christmas holiday and also decline in metal prices weighed on mining companies. European markets gained during the week. Market started the week on subdued note after ratings agency Moody's cut Ireland's rating. Moody's has slashed its credit rating on Ireland by five notches to Baa1 from Aa2 citing concerns over banking liabilities and economic prospects. Further, markets recovered from previous day loss as European leaders in Brussels agreed to set a permanent bailout fund for debt-stricken countries in the region by 2013. European Central Bank also said it will increase its capital base by Euros 5 billion (USD 6.6 billion) to Euro 10.76 billion. Also, better than expected economic data helped underpin market sentiment. Later, markets finished on mixed note in holiday thinned trade as investors largely remained away from their desks and a downward revision to UK economic growth. Investor sentiment was also subdued after Mining sector declined as investors booked profit after metal prices fell. Construction related stocks were also weak. | Weekly return on major Global Indices
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| Open Interest in Nifty Future vis-Ã -vis Nifty  Most Active Contracts  Put-Call Ratio  Volatility Index  FIIs Cumulative trailing 5 day's data
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FIIs & MFs investment in Debt Market
Bond Yield (7.80% CG 2020)
Spread  Liquidity Adjustment Facility
GoI borrowing Program - 2010-11
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Government borrowing calendar (Next four auctions)
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| Rupee had a generally firm tone over the week as India's growth outlook and relatively high interest rates boosted optimism that Indian will continue to attract foreign funds. Though there were net outflows in December, but there were no evidence of heavy selling by FIIs. Investors were optimistic that Indian growth story and huge interest rate differential will continue to attract foreign funds into the market. Further, Rupee remained strong on anticipation that dollar inflows to companies through external commercial borrowings (ECB) will put pressure on greenback.
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Tata Motors finds a crucial support at Rs 1,177. A fall below this would change the outlook to negative for Tata Motors.
K.S. Badri Narayanan
Tata Motors (Rs 1,305): The immediate and medium-term outlook for the stock has turned negative. After climbing to a new peak in November, the stock appears to have hit a plateau. It now finds a crucial resistance at Rs 1,352. Only a close above this level would change the outlook to positive. In that event, Tata Motors has the potential to reach Rs 1,425-1,430 levels. On the other hand, if the current trend sustains, the stock could head towards its immediate support level, placed at Rs 1,230. Tata Motors finds a crucial support at Rs 1,177. A fall below this would change the outlook to negative for Tata Motors.
F&O pointers: The Tata Motor December futures closed at Rs 1,312 with respect to the spot price of Rs 1,305. The counter witnessed a modest rollover of 35 per cent to January series, with most of it on the short side. Option trading also indicates a negative bias as 1,350 call accumulated open interests even as 1,300 put shed. The activity in the January options too indicates negative bias.
Strategy: Consider going short on Tata Motors January futures with tight stop-loss at Rs 1,352 (closing day basis, spot price), for an initial target of Rs 1,230. Trail the stop-loss so as to protect profits. Market lot is 250 units.
SAIL (Rs 186): The outlook for SAIL stock appears negative as long as it stays below Rs 220. However, we feel the stock could move in a narrow range of Rs 175-195 in the short-term. It finds an immediate support at Rs 178 and the next at Rs 161. The immediate resistance appears around Rs 195.
F&O pointers: The SAIL December futures closed at Rs 185.6 and the January futures at Rs 186.1, while the spot closing price was Rs 184.8. The January futures saw a rollover of 29 per cent. Option trading also indicates a neutral movement for SAIL.
Strategy: Consider short-strangle using January options. This can be initiated by selling 190 call, which closed on Friday at Rs 5.90, and 180 put that ended at Rs 5.50. While the maximum profit could be the premium collected, the loss is unlimited in the strategy. The strategy would involve higher margin commitments and is therefore advised only for high-risk appetite traders.
Follow-up: Last week, we had advised traders to consider short on India Infoline and long on Alok Textiles. While the former moved up sharply due to a buyback announcement, the latter is moving in a narrow range.
Reliance Industries (Rs 1,059.5)
Reliance Industries reversed lower below the resistance at Rs 1,080 in line with our expectation. The stock faces short-term resistance in the zone between Rs 1,060 and Rs 1,080 and we stay with the view that fresh longs should be initiated only on a strong move above Rs 1,080. Next target is Rs 1,120.
However, a three-wave move from the low of Rs 958 appears to be complete at the recent high of Rs 1,075. The stock could now decline to Rs 1,040 or Rs 1,030 in the days ahead. The medium-term trading range for the stock remains between Rs 900 and Rs 1,200.
State Bank of India (Rs 2,754.9)
This stock continued moving in a narrow band between Rs 2,700 and Rs 2,800 forming another spinning top candle in the weekly chart. The medium-term trend in the stock stays down but it has strong medium-term supports at Rs 2,720 and Rs 2,500. Investors can buy on reversal from either of these levels with stop at Rs 2,480. Subsequent supports are at Rs 2,200 and Rs 1,900.
Short-term resistances are at Rs 2,800 and Rs 2,850. Traders can initiate fresh short positions on reversal from these levels. Next resistances are at Rs 2,915 and Rs 2,975. Strong close above Rs 3,000 is required to make the medium-term view positive.
Tata Steel (Rs 673.3)
The short-term trend in Tata Steel is up since the November 30 trough of Rs 574. That the stock halted above Rs 600 in the recent correction, implies strength and the possibility of the stock breaking higher to Rs 720 or Rs 810 over the medium-term. It will, however, face a short-term hurdle in the zone between Rs 680 and Rs 700 and fresh long positions are advised only on a strong move above Rs 700. Else the stock can decline to Rs 600 or Rs 574 again.
The medium-term trend in the stock is up and investors can hold it as long as it trades above Rs 450.
Infosys Technologies (Rs 3,368.5)
Infosys continued to etch new highs and closed with 76 points gain last week. Short-term targets for the stock are Rs 3,420 and Rs 3,512. Short-term investors can hold the stock with stop at Rs 3,100.
The stock is in a very strong medium and long-term uptrend. The shallow correction between March and September 2010 implies that it can move higher to Rs 3,781 or Rs 4,470 in the next calendar. — Lokeshwarri S.K.
Jubilant Foodworks (Rs 631.2)
This pizza maker turned in to a sizzler last week as the stock price soared 13 per cent higher. Market participants were enthused by the launch of the company's new outlet in Bhubaneswar, pushing the stock price towards its life-time high at Rs 671. The stock is currently struggling to move past the resistance at Rs 650 and inability to clear this level will result in the stock declining to Rs 540 or Rs 500.
Investors can hold the stock as long as it trades above Rs 480. Subsequent supports are Rs 420 and Rs 360.
Hero Honda Motors (Rs 1,929.4)
Hero Honda vroomed to the intra-week peak of Rs 1,998 on Monday as the contours of the split with Honda Motor Company were publicised. The stock that had lost 24 per cent in the 12 trading sessions from November 30, has currently recouped most of these losses.
This stock is in a medium-term consolidation phase since April this year. The trading band since then is established between Rs 1,600 and Rs 2,100. It has strong long-term support in the band between Rs 1,500 and Rs 1,700 and investors can accumulate the stock in this band. Area between Rs 2,050 and Rs 2,100 will act as a medium-term resistance. — Lokeshwarri S.K.
