Book profit in Grasim, SBI

B. Krishnakumar

AFTER a strong rally in the last couple of weeks, the stock market sentiment turned relatively subdued during the week gone by.

Technically, the outlook for the Sensex has not changed. As expected last week, the Sensex managed to move past the earlier high made at 3050. However, the ongoing rally is likely top fizzle out shortly.

The immediate resistance is at around the 3150-3250 range. Before this, the Sensex could face a strong hurdle at around the 3068-3096 band. This band is marked by a downward gap and the earlier swing low that occurred in April.

Going by Elliott Wave Analysis, there is a case for the intermediate top having been completed at 3083.65 on Wednesday. A decline below 2966 would impart bearish trend in the Sensex. As mentioned in earlier weeks, the Sensex is likely to resume the earlier bearish trend once the ongoing rally loses steam. As of now, only a move past 3250 would impart some sort of positive trend.

The focus this week is on Grasim Industries and State Bank of India (SBI). While the outlook for SBI looks weak, the share price of Grasim could turn weak after a brief rally. The share price of Grasim Industries could probably see a rally up to Rs 320-325 range.

Existing holders of the Grasim Industries stock could remain invested and use price rally to book profit. Fresh buying may be avoided for the time being in Grasim.

In the case of SBI, the share price of the company has managed to move past the target price of Rs 185-190, mentioned a few weeks back. The scrip in fact managed to touch a high of Rs 199.3 on Monday and has turned weak thereafter. Existing holders could reduce exposure while fresh short positions may be contemplated if the scrip declines below Rs 181.

Recommendation follow-up

The price movement in cement majors - ACC and Larsen & Toubro was right on course with last weeks recommendations. In line with expectations, the share price of Larsen & Toubro turned weak. Though it managed to edge past the resistance level of Rs 180, it could not hold ground.

The scrip ended the week on a subdued note at Rs 161.8. As specified last week, the Larsen & Toubro stock is headed towards the Rs 145-150 range. Given this backdrop, it would be safer to reduce exposure in the company as and when the scrip moves up.

Aggressive traders could use price rally to take short positions with a stop loss at Rs 181. More passive traders could contemplate short positions if the Larsen & Toubro scrip declines below Rs 154.

In the case of ACC too, the share price of the company moved right on course with last week's expectations. The share price of the company ruled firm and also managed to move past the target price zone of Rs 135-140. After touching a high of Rs 142.45, the scrip turned weak on Tuesday.

The share price of ACC is likely to rule weak and could slide to the Rs 120-125 range in the near term. Existing holders could book profit. Very aggressive traders could contemplate short positions with a stop at Rs 143.

(Note: Recommendations in this column are based entirely on Technical Analysis using Elliott Wave and Point & Figure theory of the past price behaviour of the scrip concerned. There is a risk of loss in trading.)