Dalal street in comfort zone, poised for an upside

The fight between the bulls and the bears continued on Dalal Street for second week without leaving any decisive winner.

The Nifty is stuck in the same range for two weeks now, failing to cross neither the resistance of 5480 on the upside nor the support of 5375 on the downside. The movement in the index last week was like a mirror image of the previous week, with small bouts of buying and selling but without any strong signal.

The index has gained in 4 out of the last 5 weeks, showing a marginal upward bias. The realised volatility, which is the actual movement in the Nifty, has stayed in the lowest band of 6-9%.

Last week started on a slightly bullish note, touching its high for the week but the index gave off its gains during the week and closed only marginally up.

The Nifty on its way down was led by Reliance Industries where there was a talk of the company selling some of its treasury stock. The results of Tata Motors and State Bank of India were extremely good, which pulled the index up.

On the global front, the US markets ended on a weak note, cracking for a major part of the week. The CBOE volatility index (VIX) has now risen to 26.24%, which shows that investors do not have much faith in the state of the US economy. The Federal Reserve, as expected, left the interest rates unchanged.

The open interest in the August series still continues to be the highest on 5300 puts and 5600 calls, indicating that the market would not break out of this range for the month of August. The put/ call ratio has risen marginally to 1.45 from 1.38, but this still leaves the market in a comfort zone for an upside.

Last week, the mid-cap index was up 1.7%, the bank index was up by 3.3%, the information technology index was down by 2.5%, the auto index was up by 2.6% and the realty index was up by 6%. Big gainers on the index were Tata Motors, ONGC and Cairn. Big losers were Mahindra & Mahindra and Reliance Communication.

Stock ideas:
Andhra Bank: Buy with a target of Rs175 and a stop loss at Rs140, Axis Bank: Buy with a target of
Rs1425 and a stop loss at Rs1270, IDFC: Buy with a target of Rs186 and stop loss at Rs167, Infosys: Sell with a target of Rs2620 with a stop loss at Rs2860, Crompton Greaves: Buy with a target of Rs315 and a stop loss at Rs275.

Disclosure: We hold positions on behalf of our clients on the Nifty.  Divya Khanna is AVP-structured products at Mangal Keshav