Infotech sector best avoided

Deepak Singh Tanwar

With fresh developments on the recent act of terrorism, the market remained extremely volatile on Thursday. After remaining bearish during the first half, values managed to recover smartly during the later half of the day.

Still, the Sensex was down 41 points as Reliance, Infosys and RPL closed in negative territory. ITC, Ranbaxy and Zee Tele managed to gain whereas other stocks also recovered smartly from their respective lows. HCL managed to gain 10 per cent.

The recovery from the low increases the importance of the recent bottom of 2640 points although development on the Osama Bin Laden front will continue to determine the short-term direction of the market.

For those who feel that the outcome is likely to be favourable than what the market is anticipating, long position can be taken with the level of 2640 points as a reference point. The volume for long position, however, should not be large as the main direction of the market is negative. And in case the call turns out to be right, an exit should also be made quickly.

Counters like Ranbaxy, Zee Tele, HCL Tech and ITC were the star performers on Thursday.

Zee Tele gained nearly 10 per cent from the day’s low. The level of Rs 89 should be kept as stop loss for long position. It has a strong hurdle at around Rs 110.

Ranbaxy’s move was extremely impressive if one consider the weak market conditions. This is the only counter which has come closer to its September 11 level. The position is positive and a minor hurdle lies at around Rs 680. The level of Rs 600 can be used as stop loss for long positions.

ITC also gained 1 per cent but the position is not as attractive as that of Ranbaxy. The stock will find strong hurdle at around Rs 680. In any case, the reference point for long position is Rs 617.

HCL Tech was the only IT counter which gained 10 per cent. The rise was accompanied by huge volumes. While the rally was impressive, resistance is expected at around Rs 180. The risk/reward ratio is not very attractive for long position at this juncture.

Overall, the market has shown early signs of stability and those who were waiting to take long position, can start the process now.
The volume should, however, be very, very low, and as far as possible. The IT sector should be avoided.

(The analyst does not hold any position in any of the stocks mentioned in the article)