It’s time to exercise caution

Deepak Singh Tanwar

The index managed to gain 40 points on Tuesday and a large number of IT stocks showed smart improvement in their prices.
Zee Tele, Infosys, Wipro, Satyam Comp, Digital Equipment, SSi, Ranbaxy and NIIT showed impressive gains.

The performance of old economy counters was not very impressive.
Rumours that Sebi will allow futures in individual stocks had a major impact on the sentiment. If it materialises, the rally may continue in the short run.

Infosys was first to show a bounce. Once again, the stock has turned from its support area of Rs 3,600. This makes the level of Rs 3,585 an important base. On the upper side, the level of Rs 4,000 will act as an important hurdle.

Zee Tele’s recovery did not come as a surprise but it was certainly impressive.

With this, the level of Rs 87 should be used as stop-loss for all long positions. In case of Satyam Comp, the base of Rs 148 is a key level.
Digital Equipment which appeared strongest in the IT segment, showed an impressive rally.

The trend may continue. It has a minor hurdle at around Rs 525, and the next resistance lies at around Rs 600.

Reliance showed a dip and a consolidation is likely. RPL continues to remain under pressure.

SBI showed a bounce. While the level of Rs 198 should be considered as an immediate base, the uptrend will be difficult to sustain especially at higher levels.

The position of Tisco, MTNL, Bhel and Tata Tea has not shown any major improvement. Dr Reddy’s showed a smart bounce from the day’s low and the position remains healthy. In case of Cipla, the stop-loss is Rs 1,050.

Ranbaxy, which showed an impressive bounce, has a strong hurdle at around Rs 580.

The level of Rs 530 should be used as stop-loss for long positions.
Balaji Tele and Mukta Arts hit lower circuits as restrictions were put on these counters by the exchange.

Overall, while the trading volume improved, it was mainly on account of expectations of a positive announcement by Sebi. This should play an important role for market liquidity. Be very selective.

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