Week Ahead in Mkts: New highs possible

The intermediate projection would suggest a move till 4400 points on the Nifty is possible.

The market surged in the post-settlement session driven by a combo of positive monsoon projections, sops to the sugar industry and speculative activity in bank stocks.

The Nifty closed at 4318.3 points for a week-on-week gain of 1.56 per cent. The Defty was up 1,46 per cent as the rupee lost a little ground versus the dollar. The Sensex underperformed the Nifty somewhat, rising 1.26 per cent to close at 14,650 points.

Breadth was excellent with advances outnumbering declines. The Nifty Junior rose 3.2 per cent while the BSE 500 was up 1.82 per cent.

The Bank Nifty also rose by 3.03 per cent while the CNX IT registered a positive but marginal move of 0.53 per cent. Volumes were good, although they are always high in a settlement week.

Surprisingly, in what seems to be a key week, the mutual funds and FIIs were not uniformly bullish. The FIIs were net sellers through the first four sessions while domestic funds were net buyers.

Outlook: The market appears on the cusp of a bullish breakout. A saucer pattern has almost been completed with the accompaniment of high volume on the breakout.

The intermediate projection would suggest a move till 4400 points on the Nifty is possible. The short-term projection suggests intra-day levels of 4365 will be reached next week.

Rationale: High volumes and good breadth on a rising price line are a classic bullish combination.

The saucer formation is also a reliable pattern that usually achieves its targets. The last two weeks have seen a narrow trading range, a pattern that has been clearly broken. The last month has seen a correction followed by a recovery.

Counter-view: The breakout is not absolutely confirmed yet – that would have required a slightly higher close of 4336 and intra-day levels of 4365.

A combination of fund buying and speculation by operators has counter-balanced and absorbed heavy FII sales. If FIIs continue to press sales, the trend could reverse.

However, it does seem far more likely that the bull run will continue. A burst of profit booking should still see the Nifty find support around 4275.

Bulls & bears: As mentioned above, the sugar sector saw the most violent spikes. Stocks ranging from the liquid Triveni, Shree Renuka and Balrampur to Upper Ganges and KCP gained over 15 per cent on Friday.

But banks were the major influence on index moves with everything from ICICI and SBI to Corporation Bank, Kotak Mahindra Bank, Syndicate Bank, PNB and HDFC Bank did well.

Cement stocks such as ACC and Gujarat Ambuja also saw recovery. Other heavy gainers included GMR Infrastructure and Tata Tele along with Reliance Natural Resources.

MICRO TECHNICALS

ABB Current Price: 1094 Target Price: 1200

The 5:1 split has generated extra liquidity in an already-bullish counter with volumes multiplying more than 10 times since the split. It's dangerous to make price projections immediately post-split.

However if we adjust for the split, the target price ought to be about 1200. Keep a stop at 1075 and go long.

Balrampur Chini Current Price: 76.35 Target Price: 81

Despite a huge spike on Friday, the long term pattern still looks bearish in this industry bellwether.

The stock has massive resistance just above the current levels and it has not managed to violate a falling trend line drawn from its highs of May 2006 on a weekly chart. If you go long keep a tight stop at 73 and book profits above 81.

GMR Infra Current Price: 749 Target Price: NA

The stock has gained approximately 50 per cent in the past month and risen almost vertically in the past five sessions on excellent volumes. It's impossible to set a target with this sort of a pattern.

Go long, keep a trailing stop loss at 705 and raise the stop by 20 for every gain of 20. Expect high daily volatility but net gains.

RNRL Current Price: 39 Target Price: 42

This is the new darling of the punters. Massive buying in the past few sessions has pushed it close to new all-time highs. Keep a stop at 37 and go long. There is a minimum target of 42 but that is liable to be exceeded next week.

SBI Current Price: 1525.8 Target Price: 1650

“Bank” rose sharply on Friday with rising volumes to back the price move. The chart formation projects to a possible target of 1640. Keep a stop at 1495 and go long. Book some profits above the 1550 threshold.