Market Outlook 31-07-2009

It was a relatively smooth trading on the last day of July series of derivatives. Nifty opened around 4500 and steadily moved up to end the day at 4570. Incidentally, it was the highest last day close in last 13 months. Banking stocks were instrumental in keeping the momentum going as both ICICI and SBI made steady progress. IT heavyweights too played their part as TCS and Wipro logged good gains. Other IT gainers included Tech Mahindra, Patni , Mphasis, Rolta and HCL Tech. Oil marketing companies also perked up on declining crude. HPCL gained more than 8% while BPCL and IOC too registered smart gains. Other major gainers were REC, Aurobindo, Bhushan Steel, Ambuja Cement and IDFC. Some of the prominent losers were PNB, Bajaj Hind, Adlabs, Titan, Educomp and Sun Pharma. Volumes were again on the higher side while breadth was slightly positive. Nifty is again attempting a breakout above 4625 and if that happens on Friday it would mean a weekly breakout too. Weekly breakout is more significant and two consecutive weekly closes above 4625 would open up much higher targets for Nifty. A bullish inverted head and shoulder pattern is developing in weekly charts and as mentioned above two weekly closes above 4625 would suggest a breakout from this pattern, which in turn would have extremely bullish implications. The pattern target if achieved could take us to new all time highs and this also suggests that 3850-3950 might act as strong support in the short to medium term. On daily charts too a sustained breakout above 4625 could open up fresh targets of 5250-5350 for Nifty. Auto stocks have led the way from 3920 to current level and they might just continue to provide leadership in coming weeks too. Certain IT, FMCG and Pharma heavyweights are also showing bullish patterns and smart rise over next few weeks is likely in stocks like DrReddy, Cipla, Ranbaxy, TCS, Wipro, ITC and Dabur India. As far as immediate short term is concerned fresh breakouts are seen in JP Associates, Dish TV, Triveni, Ambuja Cements, Neyvelli, HDIL (above 282) and Bhushan Steel. Nifty has immediate support around 4520-30 and then around 4450-60.