Market outlook positive

There are tentative short-term targets of Nifty 5850 and Sensex 19450.

The market roared back into the black as it absorbed the impact of Sebi's clarifications on the participatory notes issue. The Nifty gained 9.34 per cent and shot up to 5702.3 points while the Sensex was up 9.59 at 19,243 points, hitting a new all-time high. The Defty gained 10.16 per cent as the rupee hardened again.

Volumes were decent during settlement but lower than in the previous week which featured heavy FII selling. Breadth was good with advances comfortably outnumbering declines.

Incidentally both FIIs and Indian funds were net positive through the week. The Nifty Junior gained 12.64 per cent while the Bank Nifty gained an astounding 17.9 per cent. The BSE 500 was up 10.34 per cent.

Outlook: Continuous volatility seems almost given in the new settlement but it does also seem that the fear of an extended bear market has receded. The short-term outlook also seems positive.

The Nifty should continue to log net gains in the coming week although momentum will slow. There is a tentative short-term target of Nifty 5850 (Sensex 19450). On corrections, the support at 5500-5575 should hold.

Rationale: We may see somewhat reduced, but nevertheless high-volume trading across both cash and derivatives through the November settlement. The pattern has settled back into a bullish one of higher highs which suggests that the long-term bull market is healthy.

Counterview: The one point of misgiving was that the sell-offs came on higher volume than the re-entry. If the FIIs have decided on an orderly PN exit policy, there may be a lack of demand to fuel the further rise of the market in the short-term.

Bulls and bears The movement was overwhelmingly bullish across large-caps and mid-caps. At least partially, this was driven by short-covering. The biggest gains came in the sectors such as finance that had been hardest hit when the PN news broke. Among banks, SBI, HDFC Bank, ICICI Bank and IndusInd all looked very strong.

Another sector which showed terrific strength was metals – both ferrous and non-ferrous metals such as Sterlite, Sail and Tata Steel did well.

There were also winners scattered across the infrastructure, engineering and construction sectors, such as L&T, Suzlon, VSNL Bharat Forge and Jaiprakash Associates. And of course, the Reliance and ADA group stocks all bounced big time after taking a hammering in the preceding week.

MICRO TECHNICALS

BHARAT FORGE Current Price: 336 Target Price: 360

The stock has shot up on decent volume expansion. It has a likely short-term target of 360 and an obviously bullish formation that could take it a lot further in the long-term. Keep a stop at 325 and go long. Book at least partial profits above 355. Consider taking delivery with six weeks time frame.

INDUSIND BANK Current Price: 94.9 Target Price: 103

The stock has generated huge volumes as it has moved from 80 to the current levels. It has fulfilled its initial price target but looks capable of a further upmove. Keep a stop at 90 and go long.

LARSEN & TOUBRO Current Price: 3873 Target Price: 4100

The stock has climbed with a volume expansion. It has a target in the 4100 region. The problem with this move is that it has come so fast there are no supports near the current levels. Keep a stop at 3775 and go long.

SUZLON ENERGY Current Price: 1949.5 Target Price: 2400 (long-term), 1875-2000 (short-term)

A strong breakout on volume expansion seems to be now moving into a consolidation phase. The stock could swing between 1875-2000 for a few sessions. Buy anywhere below the middle of this range and accumulate, looking for a three-month target of 2400. Alternatively buy below 1940 and sell above 1970 for short-term trades.