Market has evaded bear grip, mid-caps offer some action

Special to Firstpost

S&P CNX Nifty (5,471.25): The index tested the target level of 5,230 that was mentioned last week. After a scary drop on Monday, the Nifty stabilised as the week progressed and the sharp rally last Friday should have soothed the nerves of market participants.

From a technical perspective, it is positive to note that the index managed to hold above the February 11 low of 5,177. A break below this level would have confirmed the bearish sequence of lower highs and lower lows.

While the rally of Friday is encouraging, the index is not out of woods as yet. Only a move past the May 13 high of 5,605 would indicate a reversal of the bearish trend. A breakout past 5,605 would trigger a rally to the major resistance at 5,800.

BSE Sensex (18,240.68): The sharp fall on Monday had pushed the index below the support level of 17,780. But the index recovered quickly and is now within striking distance of the bullish trigger level of 18,673.

A close above this level would indicate a reversal of the short-term downtrend and justify the case for considering long positions. As observed in recent weeks, much of the action is focused in mid- and small-cap stocks.

This segment offers a lot of buying opportunities from a medium-term perspective. Those willing to play the waiting game may accumulate stocks such as Dish TV, Godrej Industries, Pidilite Industries, Petronet LNG, Bhushan Steel or SKF India.

Tata Chemicals (Rs 361.50): The Tata Chemicals stock got into a downward corrective phase after touching a high of Rs 384.25 on June 1. That the downtrend was arrested on Thursday, at the key support level of Rs 345, is a bullish sign.

The stock could now rally to the short-term resistance at Rs 384. Long positions may be considered with a stop-loss at Rs 342. A breakout past Rs 384 could help the stock test the major resistance at Rs 410.

IndusInd Bank (Rs 266.35): Stocks from the banking sector were amongst the top gainers on Friday and IndusInd Bank was no exception. The stock has been in an uptrend and the up-sloping trendline running through the February 2011 low of Rs 203.75 and May 5 low of Rs 232 has acted as a strong support.

The stock could rally to the short-term resistance at Rs 286. The stop-loss for long positions may be placed at Rs 248.

(The views and recommendations featured in this column are based on the technical analysis of historical price action. There is a risk of loss in trading. The author may have positions and interest in the instruments featured in the column.)