Deepak Singh Tanwar

FOR the first time, on Monday, in the last five trading sessions, the index gained 68 points and for a change, the sentiment for IT stocks was positive.

The recovery has been smart on IT counters, and a large number of stocks managed to hit 16 per cent upper band. Infosys, Reliance, RPL, Satyam Comp, SBI, ITC, and Bhel helped the index to show a smart recovery of nearly 160 points from 3096.51 points — the 27-month low.

The recovery certainly provides a major relief. The problem however is of sustaining it at higher levels. While the immediate hurdle for the index is at around 3368 points, it has a major base only at around 2800 points. Infosys did well, and managed to gain 8 per cent. Selling is expected at higher levels. Satyam Comp also has a resistance at around Rs 210. Zee Tele will also face selling pressure at higher levels. The performance of HLL was also far from impressive. The stock has dipped below its first important base of Rs 205. ITC may also find selling at higher levels. The level of Rs 805 can be used as a stop-loss point for long positions.

Reliance and RPL also showed a bounce. The position of SBI is no different. Tisco, and Bhel showed smart recovery. For Tisco, the first hurdle is at Rs 130 whereas Bhel will also struggle to reach the level of Rs 148.
Telco and Ranbaxy also appear weak and any move would be of a corrective nature. The cement counters meanwhile showed a mixed trend. ACC and GACL managed to do well but L&T and Grasim dipped sharply during the second half of the day. In case of GACL, the level of Rs 180 will act as first major resistance and the level of Rs 140 will be the first resistance for ACC. The outlook for L&T and Grasim will improve smartly above Rs 227 and Rs 295 respectively.

Overall, while the undertone continues to remain negative, one needs to be careful in case of IT counters. One needs to be choosy in old economy counters.

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