Weekly Technicals: Markets stuck in narrow range
Markets ended positive for the second consecutive week. The Nifty closed at 5366.30 for the week ended August 17. The benchmark index achieved short term targets of 5380-5400 levels as expected last week and closed near crucial resistance level of 5400. It has strong breakout at these levels and if it sustains above this level then only further up trend can be confirmed for higher targets. Short term trend is up till the Nifty remains above 5300. Break out from this narrow range of 5300-5400 levels will finally confirm future trend of the market. One should expect market to finally confirm breakout from this range on either side next week. Breach below 5300 levels can drag the Nifty to 5160 levels on downside and topping 5400 levels can lift it to 5550 levels on upside in the short term.
Further, the market remained very stock specific this week as well. RIL,Infosys, HUL, L&T etc were the major contributors of the index on the upside while metal shares such as Hindalco, Sterlite were underperformers in overall market. midcap and small Indices continued to remain underperformers for the third consecutive week as compare to benchmark indices Nifty & sensex. It is not a good sign for overall bullish structure of market as participation has to be broad based for strong medium term uptrend of the market.
The WPI Inflation for July 2012 at 6.87% was below market expectation against 7.25% in June 2012. Sustainability below 7% will only provide some comfort to the Reserve Bank of India at its forthcoming policy meet next month.
The report by The Comptroller and Auditor General spooked market sentiment on Friday. Three CAG reports that were tabled in the Parliament focused on the alleged losses to the government because of violation of norms in allocation of coal blocks, the concession
agreement and land given to DIAL, and award of Ultra Mega Power Projects to companies like Reliance Power and Tata Power.
Meanwhile, the Prime Ministers’ Economic Advisory Council lowered 2012-13 GDP forecast to 6.7%, said fiscal deficit is likely to be 5.06% of the GDP, while current account deficit is expected to be 3.6% of the GDP. FY13-end inflation figure is expected to be in range of 6.5-7%.
Rupee is still trading in a narrow range of $56 to $54. Breakout of this range will only confirm further trend in USD/INR. Short term trend is up till the Rupee remains above $54. Global market remained range bound with positive bias. They are also trading near their
crucial resistance/breakout levels. Indian markets may also take cues from global markets next week.
Educomp looks good to BUY at current market price of Rs 158.50 with stop loss at 155.40 for target of 165. PNB has taken support around 710 levels. One should buy at current market price of Rs 725 and also at every decline till above this level for target of 750. Hindalco looks weak in the metal sector, one should sell at current market price of Rs 113 and also at every rise with stop loss at 120 for a downside target of 105. Tata Power seems to have completed its pull back rally and confirmed weakness on charts. One should sell it at current market price of Rs 97 with a stop loss at Rs 100.40 for a lower level target of 92.
To summarise, markets are likely to remain range bound with positive bias till it gives breakout at either of side. One should be very stock specific in this kind of market.
The writer is Portfolio Manager-PRO TECH-PMS at Sharekhan Ltd.
Disclaimer: The analyst may have a position in the scrip mentioned above; the views given
above are the personal views of the analyst"
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