Market continues broad uptrend

MACRO TECHNICALS

A move above 3,250 would confirm a new intermediate uptrend.

The market continued its upward spiral with the Sensex crossing 10,000 to close at 10,099 points for a week on week gain of 4.23 per cent. The Nifty was up 5.34 per cent at 3,077.5 points. The Defty gained a disproportionate 8 per cent as the rupee strengthened sharply.

Volumes improved considerably as the market rose. Breadth was excellent with advances comfortably outnumbering declines. FIIs remained net buyers for the week. So far, December has been the first month since April when FIIs have been net buyers. However, domestic funds were sellers. The BSE 500 gained 5.6 per cent.

Outlook: The Nifty remains on course to achieve its breakout target of somewhere between 3,150-3,250 despite probable rise in volatility during settlement. A move above 3,250 would confirm a new intermediate uptrend and suggest a period of net gains through till early January.

Rationale: The upward breakout past resistance at 2,850 has been followed by volume expansion across both cash and derivatives segments. This makes the chart target projections of 3,150-3,250 appear more achievable. A climb above 3,250 would confirm an intermediate uptrend because it would be a higher high.

Counter-view: The FIIs have been positive in December as a short-covering strategy. They have also cut back significantly on F&O exposures. In January, their attitude may change with the new fiscal year. If they go on another extended selling spree, the market trend would reverse. Alternatively, if buying continues, upside targets may be exceeded.

Bulls & bears: As mentioned above, breadth was good with bullish action across many sectors though larger stocks were favoured. Banks contributed a disproportionate amount to the upsurge with the Bank Nifty rising by over 10 per cent as yields dropped across the bond market. PSU banks such as Bank of India, Canara, Oriental Bank and PNB led the charge but private banks such as Axis and ICICI also made gains. IT stocks also went up with the CNXIT rising 5 per cent – rather surprising, given the rupee’s strength.

Other rate-sensitive stocks especially real-estate developers like DLF, HDIL IBREL, and Unitech bounced. PSU refiners like BPCL and HPCL shot up as crude prices fell further and there was some bullish action in auto shares as well with Ashok Leyland and Maruti looking promising. There were no attractive short positions apparent but if the rupee continues to strengthen, IT will be the first sector to see shorting. Also the real-estate sector has significant downsides – a sell-off could be considerable.

MICRO TECHNICALS

AXIS BANK
Current Price: Rs 546
Target Price: Rs 585

The stock has made a breakout on expanding volumes. It has a minimum target of about Rs 585 and a likely target of Rs 600. Keep a stop at Rs 540 and go long. Book a partial profit at around Rs 570 where there is some resistance and at two-thirds of the position above Rs 585.

BPCL
Current Price: Rs 385
Target Price: Rs 405

The stock has just made a breakout on enhanced volumes. It has a minimum target of Rs 405 and it could go further. This has some of the signs of a major trend reversal. After several years of bearishness, the stock could be going bullish. Keep a stop at Rs 375 and go long.

Hind Unilever
Current Price: Rs 265
Target Price: Rs 280

The stock has made a breakout on good but not excessive volumes. It broke a key resistance at Rs 255 and has a minimum target of Rs 280 and a possible target of Rs 300. Keep a stop at Rs 260 and go long.

Maruti
Current Price: Rs 549
Target Price: Rs 580

The stock has been consistently generating volumes and it has eased through resistance between Rs 540-545. The target should be around Rs 580 but there is a strong resistance at Rs 560 to be overcome. Keep a stop at Rs 545 and go long.

PowerGrid
Current Price: Rs 83
Target Price: Rs 92

The stock has made a breakout from a trading range on excellent volumes. It has a potential target in the range of Rs 95 but there’s very heavy resistance between Rs 88-92 and that could be a barrier. Keep a stop at Rs 80 and go long