Positive undertone in Tata Steel

B. Krishnakumar

AS expected, the Sensex eased to lower levels in the previous settlement.

After touching a low of 3,492 points, the BSE Sensex staged a come-back on Thursday. The 100-point rally on Thursday infused short-term positive trend in the market. Even in the current market scenario, the decline to 3,200 or even the 2,800-3,000-zone is not completely ruled out.

The movement of the market over the next couple of weeks and the momentum behind the rally would be key factors that would either negate or confirm the possibility of a further downside potential for the Sensex. As of now, a close past 3,930 would indicate the possibility of a firm trend in the market for the next couple of weeks. A move past 4,000 would add further credence to the underlying positive trend at the market.

Given this backdrop, existing holders of index stocks and software heavy-weights could remain invested. They could contemplate partial profit-booking once the Sensex moves to the 4,000-point mark. Fresh purchases in index heavy-weights may be deferred for the time being.

This week's focus is on Tata Tea and Tata Steel (Tisco). The outlook for the two Tata group majors is entirely contradictory. While Tata Tea appears to be in the midst of a short-term downtrend, Tata Steel appears to have the potential to seek higher levels.

The stock of Tata Tea (Rs 181) faces resistance at around the Rs 190-level. Existing holders could pare exposures once the scrip moves to the price zone of Rs 190. Short positions, with a tight stop, may also be contemplated by aggressive traders.

The rally in Tata Steel (Rs 101.15) has infused short-term positive trend in the stock. Existing holders could use price upmoves to book partial profit. Fresh exposures may be contemplated on an evidence of support at around the Rs 94-95 range.

Recommendation follow-up

The price action in Nestle India, NIIT and Wipro was bang on target with last week's recommendation.

As mentioned in the previous week, the Nestle India stock turned weak to touch a low of Rs 493, ending the week at Rs 505.2. Given that the stock has still not completed its downward cycle, intermittent price rally could be used to clip exposures. Aggressive traders could also contemplate short positions with a tight stop-loss. Fresh buying may be contemplated if Nestle declines to the Rs 450-460-range.

Similar to Nestle India, the price movement in NIIT was also right on course with expectations. The stock bounced back sharply even amid weak market sentiment that prevailed during the first half of the week. It comfortably managed to move past the price target of Rs 1,450, mentioned last week. Existing holders could book profits and contemplate re-entry at around the 1,480-1,500-level. Fresh purchases may also be contemplated on an evidence of support in the above mentioned price range.

After an initial weak trend, the Wipro stock too managed to stage a recovery. It is on its way towards the price target of Rs 2,500-2,600, mentioned last week. Existing holders could use price rally to the Rs 2,500-2,600-range to cut exposures in Wipro. Aggressive traders could also contemplate short positions, with a very close protective stop, on evidence of weakness in the above mentioned range.

(Note: Recommendations in this column are based entirely on the technical analysis of the past price behaviour of the scrip concerned. There is a risk of loss in trading.)