26-Oct-09

Markets slipped from nearly one and a half year highs amid extremely negative market breadth. Both Sensex and Nifty lost close to 3% as mid caps and all sectoral indices, with the exception of Technology and metals, lost ground. Heavy weights Reliance, Grasim and L&T broke down sharply and figured among the biggest losers in Nifty. There were losers in almost all sectors except some outperformers from Metals and Technology. HCL Tech, Nalco, Hindalco, TCS, ITC, Infosys and Wipro were among the major gainers while Grasim, Reliance, Reliance Capital, L&T, Tata Steel, Suzlon, Unitech and Reliance Infra were the major losers.

During the last few months, markets didn’t look as fluid as they are looking at this point of time. There are certainly reasons for this.
a. The market breadth during the last week was extremely negative.
b. There were some significant breakdowns in some of the heavy weights which make the markets not as lucrative as they looked for last few months. Heavy weights like Reliance, L&T, Grasim and Bharti have seen strong breakouts on the downside which doesn’t augur well for the markets. Charts signal that medium term peaks are made in these stocks and further downside looks imminent though we may see intermittent bounce backs. Any rise in these stocks is a selling opportunity and hence we recommend traders to avoid.
c. Nearly one fifth of the stocks traded in the F&O segment are trading near their respective lows for the month.
If Nifty were to breach 4900 decisively, then we may see sharp downside towards 4400, a fall which is long overdue. Exit long positions if Nifty closes below 4900 and look for opportunities to create shorts.

SELL
JPHYDRO @ 75-76 Tgt 70 SL 76.60
SESAGOA @ 330-333 Tgt 300, 284 SL 340
RELCAPITAL @ 890-900 Tgt 800 SL 920
FINANTECH @ 1300-1310 Tgt 1200 SL 1330
SUZLON @ 86-86.50 Tgt 80, 72 SL 88
HCLTECH @ 330-333 Tgt 300 SL 340
RELMEDIA @ 335-337 Tgt 310 SL 345