Market Technicals

Markets are likely to head for volatility as the situation in Pakistan will determine investor sentiment.

The last settlement of the year went through peacefully with a recovery driven by short-covering. Even Benazir's death failed to spark bearishness.

The Sensex ended up 5.45 per cent week-on-week and closed at 20,206 points while the Nifty was up 5.43 per cent at 6079 points. The Defty gained 5.86 per cent as the rupee ended the year at 39.44/ USD.

Breadth signals were mixed. Advances far outnumbered declines. But volumes were exceedingly low except on Thursday, when prices oscillated within a very small range.

The Nifty Junior (+6.15 per cent), the BSE 500 (+6.28 per cent) and the Midcaps (+6.63 per cent) all outperformed the two biggest indices. Both FIIs and mutual funds closed out the year on a positive note.

Outlook: The last two sessions have seen prices stuck inside a very narrow range. The best guess is the trading range will widen to about 6,000-6,200.

Closes outside this zone will be significant especially if they occur with volume expansions. It is difficult to predict direction in purely technical terms but there are practical reasons why the market is somewhat more likely to head up.

Rationale: Obviously there is a lot of resistance above 6,050 and equally good support at 5,975. Volumes are likely to expand one way or the other with the new year.

Usually FIIs tend to make positive allocations in January (though they were negative in January 2007). Any fresh demand will drive up such a delicately balanced market.

Counter-view: The market could well have a delayed response to turmoil in Pakistan. If that occurs and if FIIs are conservative or negative in their initial 2008 allocations, the market could easily swing down again.

Bulls & bears: A wide and varied list of stocks went up this week but most moved up on negligible volumes.

Among the more interesting sector plays was the continuing interest in the sugar sector: Bajaj Hindusthan and Balrampur Chini led the pack.

There appeared to be some focused buying in Bharat Forge and Bhel. Cairn India and Essar Oil continued to ride on bullish sentiment that started about a month ago. Educomp and Gateway Distriparks saw steady buying.

MICRO TECHNICALS

BHEL Current Price: 2,584 Target Price: 2,800

The stock has hit a low and then consolidated and started moving back up. It is time to accumulate with a perspective of about 15 to 20 sessions. It is likely that a target of 2,700 will be hit before there is major resistance. In the 15-20 session timeframe, a target of 2,800 should be achieved. Keep a stop at 2,500 and take delivery.

Educomp Current Price: 4,712 Target Price: NA

The stock is moving up strongly with volume expansion. It's impossible to project a target with this formation, which has maintained a 45 degree trendline on weekly charts since around April 2007. Keep a trailing stop at 4,400, and go long. Move stop up 150 points for every 150 point move.

Parsvnath Developers Current Price: 458.5 Target Price: 480

The stock has broken a resistance on good volume action. It has a target somewhere in the 475-485 range. Keep a stop at 440 and go long. There is likely to be a lot of intra-day volatility and it's possible that the stock may hit 490-500 levels intra-day as well as swing down till 435. Book profits above 480.

Shipping Corporation of India Current Price: 306 Target Price: 320

There has been a sudden jump in trading volumes in the past couple of sessions. SCI broke an important resistance at 285. It's difficult to set a target with this sort of sudden rise but the minimum target should be about 320 with the potential for a larger move till about 330. Go long, book a partial profit at 320 and exit at 330. Via Business Standard