Consolidation is likely

Deepak Singh Tanwar

High volatility was the key feature of the market on Thursday. Both the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) reported a sharp jump in volume as prices moved in a wide range. After a strong opening, stocks, especially the software segment, showed a sharp dip. The mid-session saw some improvement, but a sharp drop was also witnessed in the last one hour of trading. The index, meanwhile, gained 30 points as counters like Infosys, SBI, RPL and ITC managed to gain. From index point of view, the level of 3370 points is an immediate base and consolidation is expected in the range of 3380-3480 points. For the process of consolidation, volatility may continue on both old, as well new economy counters.

Infosys attracted strong volumes and still managed to gain more than 6 per cent. The undertone is strong for the counter and a sideways to positive move is expected. Satyam Comp was also among the strongest counter and may remain firm.

The position will improve further above Rs 265.

Other stocks like Digital Global, Wipro, Zee Tele, SSI, Global Tele and HFCL, however, showed a sharp dip from their respective highs.
Although, sharp decline is not expected from current level, one needs to wait for consolidation to make fresh long positions.

Reliance witnessed selling pressure around its resistance of Rs 320. A mixed trend is expected. RPL meanwhile appears favourable for long positions. The level of Rs 32 can be used as stop loss for long positions. ITC is close to its first resistance of Rs 730 and it appears that it will cross it easily. The next hurdle for the counter is at around Rs 750. SBI also improved in the last 15 minutes of trading and further improvement is not ruled out.

Counters like HLL, Bhel, MTNL, HPCL may also do well. Among the cement sector, ACC and Grasim witnessed profit-booking, while GACL and L&T showed smart gains. ACC is expected to consolidated around the current levels, whereas L&T may advance further. After a resistance of Rs 230, the next hurdle is expected at around Rs 260. Telco and M&M moved in a narrow range, but a positive trend is expected.

Among the pharma stocks, Ranbaxy showed a sharp dip. Further decline, however, is not likely from current levels. For traders, the level of Rs 725 can be used as stop loss for long positions. The outlook for Cipla and Dr Reddy’s Labs also remains favourable.
Overall, while the process of profit-booking may continue on some counters, one should avoid temptation to sell short.

(The analyst holds a long position in Telco, Ranbaxy, L&T and
Dr Reddy’s Labs)