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Weekly Technicals: Nifty ends above 5300, strong resistance at 5400

Devang Shah/ 11 Aug 12 | 11:50 AM

Benchmark stock indices ended higher for the second consecutive week. The National Stock Exchange's 50-share S&P CNX Nifty closed at 5320.40 in the week to August 10 closing above its resistance level of 5300. The benchmark index has strong support at 5250 and short term trend remains up till it remains above this level. One should expect Nifty to retest 5380-5400 levels in the week ahead. It has strong resistance/ breakout at 5400 and a close above it will only determine further higher targets in the medium term. Until then, the Nifty is likely to remain range bound between 5250-5400 levels before it gives a breakout on either side. From a derivative perspective Nifty has strong resistance at 5400 level on the upside.

Last week the market movement was stock specific. RIL, HDFC Bank, HUL, ITC, Sun Pharma etc were the major gainers while state-owned banks remained underperformers after selling pressure was seen at higher levels. SBI, Ranbaxy, Bharti Airtel were major losers during the week after they posted lower than expected results. Sun Pharma announced robust earnings for the first quarter beating street expectations.

June IIP was also a disappointment after it contracted 1.8% which was significantly lower than consensus estimate of 0.4%.  Further, consensus estimate of many international agencies & banks for FY13 GDP came below 6% on account of growth slowdown. The contraction in industrial production will put further pressure on the Finance Minister’s plans to fast track economic growth by implementing strong policies and speedy reforms. The monsoon session of parliament which began this week will be in focus for further plan of action and future agendas of the government.

Inflation data which is scheduled to be released on August 14 will be closely watched by investors. Moderating inflation would give the central bank more legroom to cut interest rates at its policy meet next month. Meanwhile, the RBI is also closely watching the monsoon situation across the country which will help cool off commodity prices leading to lower inflation.

We are nearing the end of the first quarter earnings season. Tata Steel and Coal India are the frontline companies which will announce results next week. Rupee has been trading in a narrow range between Rs56 to Rs54 for the last 4 weeks. A break out from this range will only confirm further trend in USD/INR. Short term remains trend is up till the currency remains above Rs54. The market may also track global developments for future trends. Global markets have remained range bound with a positive bias and are close to breakout levels on the upside.

Infosys looks good at current levels. It closed above 40DMA for the first time since June-2012. One can buy at the current market price of Rs 2315 with a stop loss at  Rs 2265 for a target of 2415. RIL looks good on every decline and has a good risk reward if you buy at current levels. One can buy the stock at current market price of Rs 782 with a stop loss of Rs 768 for a target of Rs 830. HDFC Bank remained an outperformer in the recent rally. One can buy at Rs 602 with a stop loss at Rs 590 for a target of Rs 630. Among midcap stocks, Balrampur Chini has broken out of bullish inverted head and shoulder pattern on the charts and closed above it. One can buy the stock at Rs 67.60 with a stop loss at Rs 62.50 for a target of Rs 77.

The market is likely to remain range bound with positive bias in the week ahead until it gives a breakout. One should be very stock specific in this kind of a market.

The writer is Portfolio Manager- Protech PMS at Sharekhan Ltd

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