MARKET OUTLOOK
Positive global cues helped the market to open strongly in the positive territory as Nifty began the day
around 4910. But it failed to make further progress as the local concerns dominated the proceedings right
after about initial 30 minutes. Heavyweights like RIL, Bharti , DLF, Unitech, Reliance Infra and Grasim
witnessed strong selling pressure at higher levels and ended the day in negative territory. Idea was the
biggest loser amongst the Nifty counters. Some of the metal stocks however, managed to sustain the selling
pressure and closed in positive territory. Hindalco and Tata Steel emerged as the main Nifty gainers. HUL,
Hero Honda and JP Associates also posted decent gains. But overall it was a negative day for the markets as
advances lagged declines by a huge margin. Mid cap and small cap counters were under pressure, more so
after reports of SEBI cracking on certain entities for manipulating some stocks.
Nifty again failed to muster enough strength to pierce 4930-4950. It did manage to post modest gains on the
closing basis but the overall bias remains negative. Most of the heavyweights are encountering strong
resistance at even moderately higher levels. RIL closed around 975 and it could open up lower targets of
around 930-35 if it begins to trade below 970. Market is likely to remain volatile between 4700 and 4950 for
remaining trading days before Budget. In the immediate term support is seen around 4820-30 and then
around 4770. It is better to stay away from short term trading and take a view only after this week’s trading.
DERIVATIVE PICK
BEL (CASH – Rs.2047.40): This stock has completed its upward impulse pattern as it marked the high of
Wave 5 at Rs.2166. The negative divergence in the classical charts is a classical text book signal and the 14
day RSI is facing strong resistance around 60 levels. Selling is advised on a positional basis below Rs.2038
with a stop loss of Rs.2066. The targets expected are Rs.2019 and Rs.1995. The time frame for the trade
would be around 2-3 trading days.
RELIANCE (CASH – Rs.970.75): This stock never really participated in the uptrend which started from
March 09. In fact, the recent uptrend was the only exception when the market went up without participation
from Reliance Industries. This stock has shown a lot of weakness in charts of all time frames. Selling isadvised below Rs.969 for a target of Rs.954 and Rs.946. Lower target of Rs.938-940 is also possible. Stop
loss of Rs.986 should be kept. The time frame for the trade would be around 3-4 trading days.
NIFTY VIEW
Markets slide again, 4930 resistance holds
For the third time since Feb 3, the Nifty was unable to cross the 4925 resistance level, and retreated back to
close at 4856.40, giving up all its intraday gains.
The Nifty, today, rallied to 4912, but faced strong selling to end up much lower. In any case, the Index did
not cross the 4925 level. Conservative traders were spared the agony of buying, then watching their position
fall into trouble.
The NSE website tells us that the PE ratio for the Nifty is above 20. Here is the latest data:
Date P/E P/B Div Yield
19-Feb-2010 20.72 3.41 1.02
Now, 20.72 is on the higher side. It could easily slide to 16, or, even 14. The declines in PE could come in
two ways: (a) Nifty falls (b) Earnings increase, quarter by quarter.
The other view is: India is a growing economy. A PE of 20.72 is not high considering the likely growth of
companies in the next few years.