The market will always do what it has to do to prove the majority wrong.' The adage is perfectly suited to the current market scenario. The Nifty, which was weakening due to the European conundrum, has turned around to become more resilient. In fact, while the DJIA in the US and the FTSE in the UK continued to plunge, the Nifty moved upwards.
On 30 June, it closed above the erstwhile resistance level of 5,210. The technical outlook has stabilised for the better and seems to be in a mood to retain its bullish hue. However, the Nifty is still trading in the wider range of 4,675-5,400 levels. If the index is to continue its upward swing, the 5,210 level should not be breached.
Also, the Nifty will have to get a decisive push and close above the 5,400 level. However, it has not registered a weekly close above this level since 18 January 2008, and despite multiple attempts, a similar feat has been elusive. In case this happens, the positive repercussions could be a treat for investors. The daily moving average convergence divergence (MACD) gave a crossover sell signal on 30 June after giving a crossover buy signal on 28 May, but this could be shortlived (a crossover buy could be on the anvil).
The Nifty is on the cusp of making a strong attempt at overcoming the 5,400 level, and this time, the daily as well as weekly charts have painted a higher top, higher bottom scenario. If it crosses this level, it would be an important event in terms of sustainability. The cause for concern would be the overseas cues, which are solid for now, but have proved to be fickle in the recent past. However, the Nifty disregarded these the last time and there could be an action replay this time too.
A sector-wise analysis based on technical parameters indicates that the large-cap stocks are ruling the roost. This has provided a plethora of long trading opportunities, including stocks of Bharti Airtel, Cipla, DLF, HDFC Bank, IDFC, Infosys, L&T, M&M, Ranbaxy, Reliance Capital, SBI, Tata Steel and Unitech. The BSE Midcap Index may turn out to be an outperformer as it is close to posting a fresh two-year high, which indicates good tidings. Outstanding investment opportunities include the following companies: Amtek Auto, Anant Raj Ind, Bajaj Finserve, Blue Star, DCHL, Educomp Sol, Godrej Ind, GSPL, HCC, IFCI, IOB, Sobha Developers and Texmaco.
The BSE Smallcap Index has also performed in line with the general market. Investors could consider stocks of Aarti Ind, Alembic Ltd, Automotive Axles, Bharat Bijli, Bombay Burmah, Ceat, Elecon Engg, Eveready Ind, Gati, Gitanjali Gems, Indotech Transformers, Mahindra Lifespaces, Paper Products, Sasken Comm, Sona Koyo, Srei Int, and TRIL.
The writer is CEO of Chart Pundit, a Mumbai-based technical analysis company.
