Building on the Budget

Written by Mayur Shah | Updated: Jun 29 2009, 04:58am hrs
The Sensex and the Nifty confirmed an intermediate uptrend on Friday while the CNX Mid Cap index did so on Wednesday when it closed past the target of 5,381.35. The indices traded sideways throughout the week and on Friday, the Sensex and the Nifty closed well past their respective targets of 14,668.40 and 4,352.25 respectively. Thus, the indices have now made a higher intermediate top and a close past their earlier intermediate top of 15,600.30 for the Sensex and 4,693.20 for the Nifty will confirm the continuation of the major uptrend, which had started in March.

Thus the intermediate bottoms made on June 23, of 14,016.95 for the Sensex and 4,143.25 for the Nifty, are the higher intermediate bottoms for these indices and as long as these indices stay above these levels, the major uptrend is intact. The earlier intermediate bottom for the CNX Mid Cap index is at 5,167.55.

In the last week, the Sensex ended 1.67% higher and Nifty gained 1.44%. On the bullish side, the BSE Capital index was the largest gainer ending 6.88% higher and was followed by the CNX IT index, which gained 3.31%. On the weaker side, the BSE Auto index was the largest loser ending 1.13% lower and was followed by the BSE Metals index, which lost 0.97%. The CNX Mid Cap index registered a larger percentage gain as compared to the Sensex and the Nifty as it ended 3.82% higher. The BSE Small Cap index ended 3.25% higher. This means that the activity in the mid cap and the small cap stocks was higher as compared to the large cap index.

The breakout on Friday happened with low volumes indicating that the bullish activity was very selective. This will have to improve in the coming week if the indices were to breakout above the earlier intermediate top and make new highs. The breakout above the recent intermediate top will possibly happen after the budget. The budget gains more importance and will decide if the major uptrend continues or the rise from March was just a rally within the bear market.

The bullish activity was seen in the tech stocks, banking stocks, FMCG stocks and select infrastructure stocks. Other sectors remained subdued but could follow suit as we get closer to the budget. If the indices remain subdued ahead of the budget and the expectations of traders and investors is less, than we would have a possibility of a strong rise after the budget. On the other hand, if the current intermediate rise gains momentum in the coming week and the expectations build up, then the budget will have to be spectacular for the indices to make a new high. I will take a look at some infrastructure stocks today.

IVRCL Infra

IVRCL Infra saw a strong rise in the past three trading sessions as the stock zoomed past its earlier intermediate top to suggest higher levels by the stock in the current intermediate rise ahead of the budget. Even though the indices are still well below their earlier intermediate tops, IVRCL Infra has made a new intermediate high. As the stock has seen a strong run up in the last week, a minor pull back in the coming will give traders a good opportunity to pick up long positions as higher levels are expected. The trading volumes remain strong indicating a positive money flow.

Nagarjun Const

Infrastructure stocks have been witnessing a strong rise in trading volumes ahead of the budget on expectation that some bullish news is expected in the budget. The relative strength line and the momentum indicators remain bullish indicating higher levels by these stocks. Nagarjun Const has been trading in a narrow range between 116 and 145 and a close past 145 with strong volumes will confirm a breakout from the current sideways formations and will result in higher levels for the stock. Position traders and investors can look for long positions with an initial stop at 116. Trail the stop after the breakout as the stock moves higher.

HDIL

HDIL is another stock in the infrastructure space and has gone into a fresh intermediate uptrend on Friday along with the few other stocks in this sector. The trading volumes have improved and the stock will face the first resistance at 265 and will have to close past this level to suggest higher levels for the stock. Above this level, the stock will be headed towards the next resistance of 325 and at 328 before the stock witnesses higher levels. On the other hand, IVRCL Infra has already moved past its earlier intermediate top and Nagarjun Const is near its earlier intermediate top and has fewer hurdles after it closes past the sideways zone. Hence, traders and investors must select stocks according to their relative strengths.

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