NIFTY FUT: Sell with a Stop Loss of 3716.30 level. Target at 3677.45-3679.45 zone.
OUTLOOK FOR NEXT WEEK (6TH OCT TO 10 OCT 2008)
FII DATA (prov)
FII
03/10: -1662.26 Cr. (Prov)DII
03/10: 56.75 Cr. (Prov)--------------------------------------------------
Strong & Weak futures
This is list of 10 Strong
Futures: Bpcl, Tvs motor, hero Honda, Lupin, Hind petro, Hin uni lvr, Acc, Boi, Hdfc & Sun Pharma.
And this is the list of 10 Weak stocks:
Kpit, sobha, Hdil, Rajesh Exports, Niit, Skumar, Jsw steel, Aptech training & Bajaj Hind.
Nifty is in Down Trend.
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Index Outlook
Sensex (12526.3)It was a nightmarish start to last week with the House of Representatives rejecting the bailout package and the credit crisis claiming a string of victims in Europe. Equities struggled to their feet mid-week, as the package was tweaked to placate the dissenting members and was finally passed.
However, resumption of the decline on Friday reflects the skepticism regarding the execution of this plan and its ability to stem the turmoil that is assuming gargantuan proportion.
It was a one-day-up-one-day-down kind of a week with the Sensex first plunging to a two-year low at 12153 only to recover sharply, leading optimists to hope that a bottom was finally in place.
But Friday's sell-off dashed these hopes as the index closed at the lowest level this year.
Volumes were low, especially in the derivatives segment. Low open interest in futures and options indicates that traders too have grown wary at these levels.
Sensex has ended the week on a shaky note, thanks to the 529 points cut on Friday. The evening star in the daily candlestick chart denotes a temporary peak at 13203. The succession of lower peaks and troughs since August 12, the foray below 12500 last week and the weekly close at this threshold compound to make the medium-term view negative.
If we consider the targets of the wave from 15579-peak, they are 12354 and then 11200. A decline to the second target remains a possibility as long as the Sensex remains below 14295.
A close above 14295, where the 50-day moving average is also positioned, is needed to allay fears of a decline below 12000.
The short-term trend in the Sensex is also down. A decline to 12135 or 11925 is possible in the near-term. Short-term traders can expect psychological support around the 12000 mark. Conversely, close below this level will exacerbate the bearish sentiment. Key resistances for the week would be at 13200 and then 13500. Failure to rally beyond 13500 will imply weakness ahead.
The Sensex is currently poised at an important juncture. A significant trough is possible in the zone between 12000 and 12500. But breach of the floor of this band can lead to sharp erosion in stock prices. The movement of this index over the next two weeks would be key to determining the long-term road-map.
Nifty (3818.3)
Nifty recorded an intra-week low at 3715 on Tuesday. But there was a sharp rebound from here and the index closed the week within our medium-term range between 3800 and 4500.
Technical indicators, however, signal that this support could be breached in the short-term and the index could decline to 3715 or 3636 in the week ahead. Failure to move above 4070 in the early part of the week will fortify this assumption.
The medium-term view too is currently negative and the target of the move from 4649 gives us the downward targets at 3778 and then 3454. If the down move continues next week, the second target would be in reckoning.
Global Cues Panic gripped investors across the globe as most indices recorded multi-year lows last week. CBOE VIX, the investor's fear gauge, recorded a six-year peak at 48.4.
Commodities could do no better last week. CRB index, that tracks the movement of a basket of commodities, was down almost 12 per cent, belying our expectation of a rally in this asset class. Strength in the US dollar added to the pressure on commodity prices. The dollar index on ICE gained a stellar 4.5 per cent after rebounding from the support at 76.
Dow Jones Industrial Average moved conclusively below the support at 10700 last week. A decline to 10200 and finally to 9900 is now possible for this index. The S&P 500 likewise shattered the support at 1170 and is now headed towards the support band between 1060 and 1070.
Asian equities turned in a better performance than their European and Latin American counterparts.
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Infosys
Infosys achieved our near-term target of Rs 1,301 and reversed on Wednesday. As explained earlier, 50 per cent retracement of the structural up-trend from April 2003 is at Rs 1,376. The on-going correction can halt at this level. But a decline below Rs 1,300 will drag the stock towards 61.8 per cent retracement level that is at Rs 1,212 or even lower to Rs 1,125. Weekly oscillators are portending a decline below Rs 1,300 in the medium-term. Investors should hold the stock with a stop at Rs 1,110.
Supports for the week would be at Rs 1,300 and then Rs 1,212. Resistances would be encountered at Rs 1,500 and then Rs 1,610. Fresh longs should be initiated only if the stock records a firm close above Rs 1,500.
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Tata Steel
It was a deep 14 per cent cut for Tata Steel last week and the stock moved close to the long-term support band between Rs 370 and Rs 390 indicated in our previous column. The down trend that commenced last November can halt in this band and form a significant trough. However, there are no signs of reversal in the charts yet. If this level is breached, the next support is at Rs 290. Investors can wait for the stock to move beyond Rs 500 before adding to their holding.
Immediate downward target for the stock is at Rs 372 and then Rs 333. Fresh shorts are, however, recommended only on a close below Rs 370. Resistances for the week would be at Rs 460 and then Rs 510.
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Reliance Infra
The short-term trend in Reliance Infrastructure turned overtly negative with the strong penetration on the support at Rs 840. As explained earlier, a re-test of the previous trough at Rs 660 becomes imminent now. The medium-term trend in the stock is however sideways and the stock is moving between Rs 660 and Rs 1,100 in what appears to be a base-building effort. A breach of the Rs 660 support will bring the next long-term support at Rs 480 into reckoning.
Immediate supports are present at Rs 660 and then Rs 590 Resistances would be encountered at Rs 880 and then Rs 980. Traders can initiate fresh longs if the stock moves firmly above the second resistance.
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SBI
SBI continued to surprise with its resilience. Despite brief incursions below the short-term support at Rs 1,400, the stock managed to close above this level on all four days. A move higher towards Rs 1,565 or Rs 1,620 is possible in the near-term. But the presence of strong resistance at these levels makes it necessary for traders to tread with care till the stock moves firmly above the second resistance.
The medium-term trend in the stock is up since the Rs 1,007-trough. The current move between Rs 1,300 and Rs 1,600 can be followed by an upward break-out to Rs 1,700 or Rs 1,850. The medium-term view will turn negative only on a close below Rs 1,250.
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Unitech
This stock recovered from the low formed at Rs 97.5 on Monday to spend the rest of the week in a narrow range between Rs 100 and Rs 120. The doji formation in the weekly candlesticks chart denotes status quo.
That is, the medium-term view remains negative.
If the stock declines below the psychological support at Rs 100, it will pave the way for a decline to Rs 96, Rs 78 or Rs 62.
A close above Rs 138 is needed to mitigate the bearish medium-term view.
Supports in the week ahead would be at Rs 106 and then Rs 98. Near-term resistances would be at Rs 134 and then Rs 145.
Traders can hold their longs with a stop at Rs 95.
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Reliance
Reliance
RIL declined below the short-term support at Rs 1,950 last Monday and recorded a trough at Rs 1781 thereafter. The bearish engulfing candle with a shaven head formed in the weekly chart implies that the down trend can continue to drag the stock lower to Rs 1,733 or Rs 1,660 over the medium-term. As explained earlier, the area around Rs 1,700 is a strong long-term support. If this level is breached, next support on the long-term chart is at Rs 1,338.
Downward targets for the week are at Rs 1,735 and then Rs 1,680. Fresh shorts are recommended only on an emphatic decline below Rs 1,765. Resistances for the week are at Rs 1,990 and then Rs 2,125.
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Arvind Parekh
+ 91 98432 32381
