Stay away from long positions

Deepak Singh Tanwar

The downtrend gathered momentum on Wednesday. While the undertone remained weak, the Sensex lost 52 points. The fall was contributed by Reliance, Infosys, RPL, Ranbaxy, Dr Reddy’s, SBI and MTNL. The trading volume was not very high on both the exchanges.

The undertone continues to remain negative and the outlook appears far from impressive. From the Sensex point of view, the level of 2830 points is an important hurdle on the upper side. The level of 2495 points would be an important base on the downside. While the sentiment is negative, the IT sector is the worst affected and a further decline is not ruled out.

Infosys, which lost 6 per cent, is below all important support levels. The decline is likely to continue, and one should avoid long positions.

The position of Zee Tele,
Digital Equipment, Wipro, Satyam Computer is equally bearish.
Digital Equipment will weaken further below Rs 206. HCL Tech has managed to remain firm but the position will weaken below Rs 122. The level of Rs 135 is an immediate hurdle.

Other IT counters also appear weak.

Among the non-software segment, Reliance showed a sharp decline and a minor base exists at around Rs 230. RPL may remain under
pressure.

HLL improved but further upside appears limited. ITC may also face hurdles at higher levels. SBI is expected to remain in a narrow range.
The domestic pharma counters remain dull as volumes were significantly lower on these counters.

The outlook for Ranbaxy and Dr Reddy’s continues to remain positive.
The outlook for other counters like Tisco, Tata Tea, MTNL and Bhel appears negative.

The cement counters showed a reaction from their highs. For L&T, the level of Rs 165 remains an important resistance. ACC may also witness selling pressure at higher levels. Grasim and GACL may show a sideways move.

Overall, long positions should be avoided as outlook is yet to improve.

For bottom fishing approach, option market is the right choice. There too, volume should be low.

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