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THE question in everyone's mind at the moment is whether the market has bottomed out. Just as one swallow does not make a summer, one bounceback does not mean the bottom has been touched. Also, it is mandatory for any index to cross an immediate high (as in the current case 4220/14100) for bulls to regain their confidence. And last, but not least, one needs to see if the oscillators are supporting the trend.
If one were to study all these three parameters together in order to judge the 'bottoming' of the market, then except for the oscillators the other two parameters are yet to support our judgement. The major oscillators like relative strength index and rate of change are diverging positively, which may help the market grossly to sustain above immediate lower levels (3790/12514). A bullish consolidation is still missing. However, sustenance of the market above 3800/12500 for the next few weeks and breach of 4215/14100 may certainly lift overall sentiment and the market may even retest the levels of 14550/4370. In case the market touches these levels then our advise is to book profits on trading long positions. Investors can reduce weakest long positions of the portfolio around these levels, as heavy profit booking cannot be ruled out. However, failure to breach an important level 4215/14100 and sustenance below 3880/12840 may drag sentiment as the formation of lower top, lower bottom, may favour bears grossly. In that event a steep sell off cannot be ruled out, which may even break previous lows.
Last week proved to be full of surprises for most emerging markets and Indian markets, in particular, where the beta of the sensitivity is higher in comparison to other markets. An exceptional fall in crude prices, remarkable recovery in US markets and inflation at an unchanged level all helped reverse overall sentiment in the last two trading sessions, making it possible to end the week above previous week's close. If one were to closely monitor indices over the last three weeks, some kind of bounceback from lower levels can be seen. It maybe termed as a support at lower levels which could have triggered the bullish sentiment in the market.
For traders our advice is follow market trend and avoid second guessing major events like political developments, etc. In case the market goes up sharply post an event, one can reduce the weakest positions of the portfolio, while a sharp fall post an event may be an opportunity to buy index stocks namely Reliance, SBI, L&T and Tata Steel with a long-term view in mind. Except for banks and cement sectors, not a single sector lived up to expectations in the current upmove. However, based on the move of stocks like L&T, BHEL and Punj Lloyd, we may see bullish consolidation in the capital goods sector in the coming few days. CNX IT is at its crucial support level and bargain hunting is "not" advisable at current levels. Avoid mid-cap stocks as the market has still not established any specific trend.
Buy Reliance at around Rs 2,080/2,085 Target: Rs 2,200. Stop loss below Rs 2,043 is a must. CMP: Rs 2,113.00.
(The author is vice-president technical research at Kotak Securities)
If one were to study all these three parameters together in order to judge the 'bottoming' of the market, then except for the oscillators the other two parameters are yet to support our judgement. The major oscillators like relative strength index and rate of change are diverging positively, which may help the market grossly to sustain above immediate lower levels (3790/12514). A bullish consolidation is still missing. However, sustenance of the market above 3800/12500 for the next few weeks and breach of 4215/14100 may certainly lift overall sentiment and the market may even retest the levels of 14550/4370. In case the market touches these levels then our advise is to book profits on trading long positions. Investors can reduce weakest long positions of the portfolio around these levels, as heavy profit booking cannot be ruled out. However, failure to breach an important level 4215/14100 and sustenance below 3880/12840 may drag sentiment as the formation of lower top, lower bottom, may favour bears grossly. In that event a steep sell off cannot be ruled out, which may even break previous lows.
Last week proved to be full of surprises for most emerging markets and Indian markets, in particular, where the beta of the sensitivity is higher in comparison to other markets. An exceptional fall in crude prices, remarkable recovery in US markets and inflation at an unchanged level all helped reverse overall sentiment in the last two trading sessions, making it possible to end the week above previous week's close. If one were to closely monitor indices over the last three weeks, some kind of bounceback from lower levels can be seen. It maybe termed as a support at lower levels which could have triggered the bullish sentiment in the market.
For traders our advice is follow market trend and avoid second guessing major events like political developments, etc. In case the market goes up sharply post an event, one can reduce the weakest positions of the portfolio, while a sharp fall post an event may be an opportunity to buy index stocks namely Reliance, SBI, L&T and Tata Steel with a long-term view in mind. Except for banks and cement sectors, not a single sector lived up to expectations in the current upmove. However, based on the move of stocks like L&T, BHEL and Punj Lloyd, we may see bullish consolidation in the capital goods sector in the coming few days. CNX IT is at its crucial support level and bargain hunting is "not" advisable at current levels. Avoid mid-cap stocks as the market has still not established any specific trend.
Buy Reliance at around Rs 2,080/2,085 Target: Rs 2,200. Stop loss below Rs 2,043 is a must. CMP: Rs 2,113.00.
(The author is vice-president technical research at Kotak Securities)
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