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B. Krishnakumar

WITH no signs of an improvement in the Indo-Pak standoff, the stock market sentiment was dampened further during the week gone by. The Sensex closed on a weak note on all the five trading days of the week. The subdued trend in technology heavy weight Infosys Technologies coupled with the slide in share price of Hindustan Lever played a key role in pulling down the benchmark indices.

On Friday, the market staged some sort of recovery after dipping to a low of 3097. However, it was Infosys that played spoil sport. But for the decline of over Rs 150 in the share price of Infosys, the Sensex would have managed to close on a positive note on Friday.

Technically, the market movement was right in line with last week's observation. As mentioned in the previous week, the Sensex resumed its downtrend. After a break of the crucial support at 3100, the index managed to close above this level on Friday. The Sensex is now tantalizingly poised at 3125.73.

The Sensex has also seen a convincing break of the crucial 200-day moving average (DMA). The index was repulsed down when it tried to get closer to this average on Monday, which again is a very bearish indicator.

Considering that the overall trend and the momentum are still weak, a close below 3097 could spell disaster for the Sensex. As of now only a break above 3265 would impart some sort of positive trend. The overall market view remains negative with a conservative downside target of around 2800-2900.

The focus this week is on Digital GlobalSoft. As mentioned a few weeks ago (refer edition dated April 21), the share price of the company appears to be on its way towards the then-mentioned downside target price of Rs 525-550. The scrip touched a low of Rs 586.4 on May 23 and has since recovered some ground.

The overall outlook for the Digital GlobalSoft scrip does not appear all that positive. Though there is a possibility of a short-term rally, the scrip could recede below Rs 586 once the expected uptrend dissipates.

Existing holders could remain invested with a stop at Rs 610. Price move towards the Rs 660-670 range could be used to reduce exposures. Fresh buying in Digital GlobalSoft may be deferred for the time being. Long-term investors could consider long positions on an evidence of support around the Rs 540-550 range.

Recommendation follow-up

The price movement in NIIT was in line with last week's expectations. Though the share price of the company failed to touch the specified target zone of Rs 275-280, it ruled firm all the same. After touching a high of Rs 267.3, the NIIT scrip turned weak on Thursday.

The recent price action does not negate last week's view of a rise towards the Rs 275-280 range. Only a drop below Rs 210 would blunt such a possibility. Existing holders could remain invested with a near-term price target of Rs 275.

Very aggressive traders could contemplate long positions if the scrip manages to move past Rs 268 in the next couple of days. Alternatively a drop towards the Rs 220-225 range could be used to take long position with a stop at Rs 209.

(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.)

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