Cautious investors booking profits

Mumbai: On Monday, the benchmark indices corrected sharply as BSE Sensex was down by 845 points. Among sectors, almost all the major sectoral indices witnessed selling pressure at higher levels, but PSU Banks and media indices lost the most, shed nearly two per cent.

Technically, after a gap-down opening market consistently facing selling pressure at higher levels. On daily charts, the index has formed bearish candle and on intraday charts, it has holding correction continuation formation, which supports further weakness from the current levels.

Shrikant Chouhan, Head Equity Research, Kotak Securities, said: “For the traders now, 20 day SMA (Simple Moving Average) or 73,500 would act as a key level to watch out. Below which, the weak sentiment is likely to continue. Below the same, the market could slip till 50 day SMA or 72,965.” Further down side may also continue which could drag the market till 72650. On the flip side, technical bounce back possible if the index succeeds to trade above 20 day SMA or 73,500.

“Worsening situation in the Middle-East with conflict between Iran and Israel flaring up had engulfed Dalal Street.Investors worldwide, including in India, have turned cautious and resorted to profit-taking,” says Prashanth Tapse, Senior VP (Research), Mehta Equities. If the situation turns bad, we may see extended broad-based selling in local markets. Geo political tensions and uncertainty over interest rate cut could have a bearing on the markets.

Above 73,500 an index could bounce back till 73800-73900. The current market texture is volatile hence level based trading would be the ideal strategy for the day traders. “The escalation in the potential conflict between Iran & Israel is a serious development and will likely adversely impact oil pricing. The Indian markets will be pressured over the short term as well. However, the Indian economy’s strong fundamentals and growth trajectory remain firmly in place over the long term,” says Samir Bahl, CEO - Investment Banking, Anand Rathi Advisors.

CMP (Current Market Price); SL (Stop Loss)/ All prices in Rs

STOCK PICKS

Hindalco (Sell)

CMP: 612.70 | SL: 626.00 | Target: 600.00

The stock has formed a doji candlestick at its resistance mark of 620.00, indicating signs of weakness at higher levels. This doji indicates indecision and shows a possible supply coming in on the stock. With a stop loss kept at 626, the stock is looking like a good sell for potential targets of 600 and below. The risk-reward is in favor of bears.

Gujarat Gas (Buy)

CMP: 572.95 | SL: 540.00 | Target: 600.00

The stock has given a strong breakout above its trendline resistance mark at 565.00, showing strong signs of momentum and strength. With the volume picking up strongly, the stock looks poised for a strong upside move towards 600 and above. A set stop loss should be kept at 540 to manage risk well.

(Source_Riyank Arora Technical Analyst at Mehta Equities)