 | 5262.80 | ( 0.32 %) | 16.90 |  |
| 1 | 2 | 3 | ||
| Resistance | 5276.13 | 5289.47 | 5308.98 | |
| Support | 5243.28 | 5223.77 | 5210.43 | |
 | 17578.23 | ( 0.34 %) | 58.97 | | |
| 1 | 2 | 3 | |||
| Resistance | 17618.69 | 17659.14 | 17717.42 | ||
| Support | 17519.96 | 17461.68 | 17421.23 | ||
Sensex (17,578.2)
It was another placid week in the Indian stock market. In the absence of any reaction-worthy news, market participants occupied themselves with more mundane developments such as advance tax numbers declared by companies. Although calm is prevailing on the surface, there are lurking undercurrents such as the unresolved Greece sovereign debt issue that can roil the situation.
The week ahead is expected to be livelier as stock prices give the customary knee-jerk reaction to the policy-rate hike on Monday morning. Expiry of the March derivative contracts on Thursday could add spice to the proceedings. Open interest surging to record levels is worrisome though the high put-call ratio denotes that the bears are beginning to outnumber bulls and it can help prevent a sharp decline.
March has been good for Indian equities. The Sensex has managed positive closes in all but four sessions and has gained about 7 per cent. This has resulted in the 14-day relative strength index moving to extremely overbought levels at 75. Last time the index reached this level was in June 2009. However, this oscillator can remain overbought for extended period without a corresponding reversal in the underlying. Weekly oscillators are still positioned in the neutral zone.
We had outlined the assumption of a flat formation from the November 2009 trough in our last column. The C wave of this formation, that is currently unfolding, has the targets of 17,074, 17,954 or 18,833. This wave is sub-dividing in to a five-wave formation with the next targets of the fifth minor at 17,653 or 17,911. The fifth minor could even have completed at Friday's peak of 17,600.
What follows next could be another X wave preceding another three or five wave formation. It is obvious that we are on the verge of a pull-back. The extent of this pull-back will determine if the Sensex will have a shy at 18,000 in the near term or will decline towards 16,000 instead. Here are a few guideposts for the week ahead:
A slight decline on Monday morning that results in the Sensex reversing higher from 17,267 or 17,061 will mean that the near term-trend remains positive and the index will attempt a new yearly high before a stronger decline.
Decline below 17,061 will take the index to the key support zone around 16,855. Presence of both 20 and 50-day moving averages in this area makes it a key short-term trend deciding zone.
Short-term investors should avoid fresh purchases on a decline below 16,850 as such a move will be a harbinger of a deeper decline to 16,527 or 16,395.
Nifty (5,262.8)
The Nifty moved past our first short-term target to the intra-week peak of 5,270. What is more important is that the index closed near its weekly high. But the fact that it had no opportunity to react to the RBI's move on Friday makes it possible that the index declines to 5,165 or 5,101 on Monday. Rebound from either of these levels will denote short-term strength and the possibility of a rally to 5,330 or 5,358 in the near-term. Medium-term target on a strong close above 5,350 is 5,450.
Traders can hold their long positions with stop at 5,000. Presence of both the 21 and 50-day moving averages in the band between 5,020 and 5,040 and Fibonacci retracement support at 5,040 makes this a strong support zone for the near-term.
Close below the 5,000 level will imply that the index is heading towards the lower boundary of its medium-term trading range at 4,700.
Global Cues
The theme in global markets last week was 'sideways'. Many global benchmarks including the FTSE 100, Dow and the S&P 500 recorded new 52-week highs but they could not build on the gains and closed on a relatively subdued note. CBOE Volatility Index, however, closed at 16.9; a 21-month low, implying that investor confidence is really high. Once the CBOE VIX declines below 15.6, it will reach the official bull-market zone for this index that is between 10 and 15.
DJ Euro SToXX 50 ended with a doji formation in the weekly chart denoting the indecisive trend prevailing over the last couple of weeks. CRB Index too ended with a down-tick implying that the down-trend from January peak could still be in force. Asian benchmarks continued to denote strength and indices such as Jakarta Composite, Karachi 100, KLSE Composite, Thailand's SET and so on recorded fresh yearly highs last week.
It was the Dow that was the show-stealer last week with 117 points gain, closing above its former peak at 10,730. Next week will be critical in ascertaining if this index will move above 10,800 to make a dash towards 11,300 or give way to move near 9800 once more.
Idea Cellular (Rs 68.7)
This idea clicked in a big way last week. The stock rose from the intra-week low of Rs 59.2 to finish almost 15 per cent higher. It has also closed above the seemingly insurmountable resistance at Rs 63 that had impeded the stock's progress repeatedly over the last three months. Last week's surge has also helped it close above the 200-day exponential moving average positioned around the same level.
Investors can hold the stock as long as it holds above Rs 59, its recent trough and the level at which the medium-term trend line is poised. Near-term targets for the stock are Rs 70 and Rs 75. Long-term trend in Idea Cellular however continues to be down. The stock needs to record an emphatic weekly close above Rs 85 to negate this view. Until that happens, it can remain choppy in the broad range between Rs 45 and Rs 85.
Long-term targets above Rs 85 are Rs 100 and Rs 113.
Reliance Industries (Rs 1,089.8)
Reliance Industries was the prime market mover last week. Higher advance tax paid by the company enthused market participants to push the stock price 4 per cent higher on Tuesday. Last week's surge has helped the stock move above its 50-day moving average. It is however halting below its short-term resistance at Rs 1,100. Reversal from here can drag the stock lower to Rs 940 or Rs 903 again over the upcoming weeks. The near-term view for this stock will turn positive only on a rise above Rs 1,100. Investors holding trading longs should tread cautiously as long as the stock trades below this level.
RIL is expected to move sideways over the medium term in the range between Rs 850 and Rs 1,200.
Piramal Life-Sciences (Rs 104.4)
The stock of Piramal Life-Sciences got a booster dose through the introduction of its new drug for Psoriasis, Tinefcon. It shot through the roof mid-week to end at Rs 105, more than 32 per cent higher for the week.
The stock was unfortunate in listing when one of the worst bear markets in recent times was only half-way through. It spiralled lower till February 2009 to bottom at Rs 30. A steady uptrend is underway since then and last week's spike helped it close above the medium-term resistance at Rs 95.
Immediate targets for the stock are Rs 136 and Rs 169. However, the stock has been quite volatile in the last two sessions and it can correct lower to Rs 100 or Rs 96. Investors with a short-term perspective can therefore cash out at current levels while the rest can hold with stop at Rs 96.
STC (India) (Rs 473.5)
This PSU stock dazzled the market last week by projecting a turnover of Rs 21,000 crore in the next fiscal and announcing its intention to enter new areas such as port development and overseas contract farming. The stock surged higher on Wednesday though it cooled a little towards weekend.
STC is in a corrective mode since February 10 and last week's rally has not yet reversed this down-trend. A strong close above Rs 500 is required to make the near-term view positive and pave the way for a rally to the previous peak of Rs 556. Short-term investors can hold the stock with the stop at Rs 440 while investors with a longer investment horizon can hold with the stop at Rs 380.
S Kumar Nationwide (Rs 64.6)
This trading favourite had an unbelievable run towards the weekend as the stock surged 36 per cent in just two trading sessions. Talk about the company trying to list its unit, Reid and Taylor within the next year was the ostensible reason behind this spike.
Following the surge from the March 2009 low of Rs 13, the stock has been moving sideways since June last year. An ascending triangle pattern is apparent in the chart over the last nine months with rising troughs and the upper boundary at Rs 54. The stock broke above this boundary on Friday and closed well above it. Investors with a short-term perspective can buy the stock as long as it holds above this level.
Next medium-term target for the stock is at Rs 74. Inability to close emphatically above this level will result in the stock fluctuating in a wide band between Rs 30 and Rs 70 over the medium term. Strong surge above Rs 74 is required to take the stock higher to Rs 93 or Rs 111 over the long-term. —
Stock Strategy: Consider selling DLF 310 March call
DLF India (Rs 312.75): We expect the stock to move in a narrow range with a negative bias. As long as it stays below Rs 405, the outlook for the stock is negative. Currently it faces an immediate resistance at Rs 340 and has a support at Rs 282. Only a breakfrom this range could set a clear trend for the stock.
A drop below Rs 282 could weaken it to Rs 233, while a close above Rs 340 could lift it Rs 441 though in between Rs 405 could act as tough resistance.
F&O pointers
DLF March (market lot 800) futures closed in same levels with respect to the spot's close of Rs 312.7, the April futures with a marginal premium at Rs 313.45. Open interest stood at 28 per cent with respect to the overall marketwide open interest positions. Besides, the rollover to April series is 11 per cent only.
Options signal neutral trend for the counter as both calls and puts saw moderate accumulations.
Strategy: Consider selling (writing) DLF 310 March call, which closed on Friday at Rs 7, as we expect the stock to weaken. While the maximum profit is the premium collected, the loss could be unlimited if DLF surges sharply. With this being the settlement week, the stock could be in for high volatility. This strategy therefore is suitable only for those who are willing to take risk. That said, since markets are closed on Wednesday, the curtailed trading in the current month derivative contracts may help capture time value favourably.
Follow-up: Last week, we had advised traders to consider shorting ICSA India with a stop-loss at Rs 142. The counter is hovering around our recommended price level; we still believe that the outlook for the stock appears negative only. As advised, traders can hold on to the strategy for one more week.
| FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| FII | 19-Mar-2010 | 2632.29 | 2348.04 | 284.25 |
| DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| DII | 19-Mar-2010 | 1416.8 | 1304.11 | 112.69 |
Arvind Parekh
+ 91 98432 32381
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