If last week’s negative advance-decline ratio and a general trend of gravitation towards downward circuits than upward ones are anything to go by, Dalal Street this week may be ready to lose some of its momentum and cut certain gains.
Perhaps bulls need a breather before a brief pre-Budget rally in the fourth week of this month. But market intelligence suggests that a correction, if at all it occurs this week, may not reverse the direction of the market. A rather paced-out decline would tactically help bulls to regenerate the exuberance around the Budget.
The whole budgetary exercise this time may unusually be long on rhetoric and strong on posturing to meet the hyped-up expectations. But on those signals the market may attempt to head towards a super bubble in the medium term.
The news of a relatively more stable Government has served as a catapult for the market. Growing risk appetite among all sections of investors may have come handy for the market operators in their exercise. But how far can the market be stretched in the short-to- medium term?
In recent years, it has been seen that the Indian equity market can attract and absorb enormous amount of liquidity and speed past the fundamentals by several times in short term and sustain it even in the medium to long term. It has also witnessed reversal of liquidity flow.
For the week ahead, chartists predict a trading band of 14,600 and 15,600 for the Sensex and 4,350 and 4,750 for the Nifty. Expect resistance to the indices at 15,490 and 15,700 and 4,680 and 4,790. Immediate supports for the indices are at 14,880 and 14,540 for the Sensex and 4,460 and 4,340 for the Nifty.
Trim long positions if indices hover below 15,000 and 4,500. Never assume a market fact based on what you read or what others say, verify everything yourselves. To succeed in the markets, it is essential to make your own decisions.
If a breakout occurs, a rise till around 4,800 or a drop till 4,300 is marked as the minimum distance. Optimists would project 5,000+ while pessimists would suggest bottoming out at 4,100. This could happen within the next 3-4 sessions itself. There are 10 sessions to go till settlement and over 20 sessions to go till the Budget. I would say the chances of a big breakout is much higher than the IV (based on option premiums) seems to warrant. That means traders should be buying options close to money.
In general terms, power sector, engineering and construction stocks are doing well and NTPC and GMR Infra both look bullish. Real estate is seeing profit booking that makes short positions on Unitech, DLF and HDIL tempting.
Sugar scrips like Renuka and Bajaj Hindustan could rise. But the most interesting seems to be Sesa Goa, which is heading north on the basis of news that Vedanta will increase its stake.
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