MACRO TECHNICALS
Devangshu Datta / New Delhi April 9, 2007
The Nifty is likely to oscillate between 3650-3800 through this week.

The market reacted to the latest RBI rate hike with a massive crash on Monday followed by partial recovery in the next three sessions. The Sensex closed at 12856.08 points for a week-on-week loss of 1.65 per cent. The Nifty was down 1.82 per cent at 3752 points. The Defty was down 0.92 per cent as the rupee inevitably hardened.

Breadth signals were poor week-on-week because most stocks mirrored index performance and closed lower. Volumes were average. The BSE 500 was down 1.53 per cent. The Bank Nifty had an under performance and closed down 3.37 per cent.

The CNX IT was off 1.78 per cent, which was a mild surprise considering industry sensitivity to rupee-hardening. The FIIs were net positive on the week while the Indian mutual funds were mildly net negative. The Nifty options' put-call ratio is around 0.88, which is an overbought signal suggesting a downside.

Outlook: The market found support at Nifty 3615 and it is current testing resistance at 3750. Given the mildly bearish signals of poor breadth and low put call ratio, we'd expect the market to oscillate between 3650-3800 through this week.

Rationale: The rate hike has been absorbed. The next "normal" trigger would be corporate results which will start flowing in right earnest only from the third week of April. Until then, the market is unlikely to develop a clear trend.

Counter-view: On its last three bottoms, (March 5, March 16 and April 2) the Nifty has penetrated its own 200 Day Moving Average on the downside. Although it has recovered on each occasion, this is a bearish signal. It could, at the minimum, test 3550 levels (hit on March 5) again.

Bulls & Bears:
The banking sector must be ripe for a dead-cat bounce but it hasn't shown any signs yet. Other rate-sensitive stocks such as auto shares are also lacklustre. Most stocks in general are moving with the broad market. Hindustan Lever was an outperformer in that it lost little ground last week.

GAIL is seeing some strong investment. Reliance Energy appears to be in a speculative bull run. Steel majors SAIL and Tata Steel are both looking good. There's some action in BHEL and Cadilla Healthcare. NTPC and IFCI are both locked into bull runs after two weeks of successive breakouts.

MICRO TECHNICALS

Cadilla Healthcare
Current Price: 347
Target Price: 360

The stock has seen a gradual upmove that is now starting to look quite promising. The initial target is 360 and if it closes above that, a target of 385 could be achieved. Keep a stop at 343 and go long.

Gail
Current Price: 292.35
Target Price: 300, 305

The stock completed a breakout on high volumes at 285. It has a likely target of 305, which would mean that it is close to completing a new high. Keep a stop at 284 and go long. There is a case for booking partial profits above 300 and holding a reduced delivery position.

IFCI
Current Price: 35
Target Price: 38

The stock made a new breakout at 34.75 on expanding volumes. It has a short-term target of about 38. Keep a stop at 32.5 and go long. There is a case for setting a trailing stop loss and letting the position run. If you do this, move the stop up 2 units per 3-unit gain.

Reliance Energy
Current Price: 500.55
Target Price: 515

The stock has climbed out of a trading range on some volume expansion. It has a potential target of 515-520. Keep a stop at 495 and go long. Be prepared for a lot of resistance at about 504-505.

Tata Steel
Current Price: 465.5
Target Price: 480

A big spurt on Thursday drove the stock past a resistance at 455. It now has a target of 480 with some resistance just above the current price. Keep a stop at 460 and go long.