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Manish Shah
The fall in Indian markets is not as serious as the selloff seen in the US and Japanese markets. This is to say that when the Nikkei of the Dow Jones loses a couple of hundred points, the fall in the Indian markets is limited to about 20 points.
In the last couple of weeks, one read reports of steps taken by entrepreneurs to improve their company's bottomline. Grasim did it by taking over the cement division of its group company Indian Rayon. Suddenly, Grasim has turned out to be a serious contender in the cement business and it has now shown a capability to challenge the leaders Gujarat Ambuja and ACC. The stock market welcomed this news as the price of Grasim shot up. This is a good step and when the cement sector recovers, Grasim will surely be one of the top gainers. The maxim `shape up or ship out' is beginning to have an effect.
Last week, we expected a minor decline of around 60-odd points to around 3,020 before the index resumes its upward trend. The index did move up but the anticipated declinedid not occur. On Monday the index opened with a gap between 3,083 points and 3,134 points. This optimism was shortlived as the index then showed a decline from its previous top of 3,144 points. Since September 9, we have seen the index move in a defined range after the spurt which took the market from 2,850 points to high of 3,144 points.
In the two weeks that followed the index remained rangebound as the market paused before resuming its future course. The pattern that is formed appears to be a continuation pattern. The market, in all probabilities, will continue to move up. Our target of the index touching a level of 3,350 points remains intact.
On the last trading day of the week the index failed to break below the support level of 3,080 points. This level was once a resistance level. Now as the index is a couple of notches above this level, it has assumed a role of a support level. This level should provide support to the market. Furthermore, at around this level one notices the appearance of a gapthat was formed in the Monday's trading session. Gaps also act as support levels.
The indicators are also showing signs that there is a bit of steam left in the market. The 14-day RSI (relative strength index) is above its equilibrium level and it is well below its oversold level. The MACD (Moving Averages Convergence Divergence) is in a buy mode. The indicators are showing signs of strength in the market. We expect the market to resume its upward course in the coming week. Traders may choose to remain on the long side of the market.
Grasim: Bullish undertone
On the monthly (not shown here) charts this stock is near its low of year 1991. The recent developments in the stock's fundamentals have turned the stock bullish. This bullishness is manifested in the stock's price movements. During the week the stock formed a long white candle which is in the nature of a `Belt hold' line a bullish pattern. The 14-week RSI is oversold and has started to move up. The volumes have also picked up a bit. Thestock seems to be in its initial phase of reversal and it may be expected that the stock over the long term may give fairly good results. Over a medium term the stock may rise to around Rs 275. One may buy at current levels. Keep a stop loss below the level of Rs 150.
EIH Hotels: Medium-term buy
The volumes in this stock have shot up in the last two months. The price of the stock has already broken above the falling trendline. The 14-week RSI has given a buy signal after showing a breakout from its double bottom. The medium-term potential in this stock could take it to around Rs 280. One may buy. Keep a stop loss below the level of Rs 190.
SAIL: Buy at current levels
The PSU monolith has been showing signs of revival since the last couple of weeks. The week's trading saw the stock move up with a heavy increase in volumes. The 14-week RSI have given an excellent buy signal by showing a positive divergence. The stock is marginally below its resistance level of Rs 6.75. Once this level isbroken the stock may see a rise to around Rs 15. The downside risk in this stock at current levels is low. One may buy at current levels. Keep a stop loss below Rs 5.50.
Traders Choice:
Tisco: Enter long
This stock is marginally below the resistance level of Rs 98. Traders may wait for the price to breakout beyond this level before buying for a target of Rs 108. Traders may enter long on breakout. Keep a stop loss below the level of Rs 95.
Telco: Sell short
The appearance of a bearish `evening star' pattern below the resistance level of Rs 150 shows temporary weakness in this stock. Traders may sell short for a target of Rs 138. Keep a stop loss above the level of Rs 150.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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