Large-, mid-caps to outperform indices

The markets could be entering a bull phase only if the benchmark indices close above their long-term trend reversal levels, say technical analysts. The long-term trend reversal level for the Sensex is 10,700 and 3,250 for the Nifty. The recent upmove suggests that the Nifty is poised to close above 3,250 with its 200-daily moving average (DMA) target of 3,455. The Sensex is poised to cross the 200-DMA of 11,250.

In the first week of April, key index stocks such as Reliance Industries, ONGC, HDFC Bank, BHEL, Infosys Technologies and Mahindra & Mahindra have been trading above their 200-DMA levels and, thus, most of these stocks are likely to target the 261.8 per cent Fibonacci retracement. For example, RIL has closed above its 200-DMA level of Rs 1,631 and now could target the 261.8 per cent Fibonacci retracement level of Rs 1,898.

RIL’s April futures witnessed short covering last week, adding an open interest of 1.14 million shares despite a weekly trading volume of 43.90 million shares. Option traders are expecting the counter to move above Rs 1,720 in near future. Traders were seen buying the Rs 1,650 strike call option at a premium of Rs 90 a share, indicating that RIL can go up to Rs 1,750.

F&O traders were seen building fresh long positions in several large-cap and mid-cap stocks such as Financial Technologies, Sterlite, Hindalco, Nagarjuna Constructions, Biocon, Hind Zinc, Mahindra Lifespace Developers, Opto Circuits, JSW Steel, Aptech, Thermax, Gitanjali Gems, and ICSA India. Most mid-cap stocks have outperformed the benchmark by rising more than 15 per cent on delivery-based buying and fresh long build-up in the derivatives segment.

Realty stocks such as DLF, HDIL, Bombay Dyeing, Peninsula Land and Indiabulls Real Estate rose sharply on short covering.

However, most of these stocks have also witnessed profit-booking at higher levels. It seems that traders are wary of building fresh long positions in realty stocks.