Time to trim frontline exposure

Mid-caps would continue to attract market interest at the expense of large-caps

Sensex (14650.51): After a subdued start, market sentiment improved as last week progressed and the index registered a sharp gain over the last couple of trading sessions. In the process, the Sensex managed to close above the positive trigger level of 14,500.
 
The short-term outlook is bullish and the index is on course to move to the target zone of 15,500-16,000 mentioned in recent weeks. The trend would remain bullish as long as the immediate support at 14,000 is not violated.

With earnings season around the corner, market volatility is likely to increase in weeks ahead. As observed earlier, it would be safer to trim exposures in frontline stocks. Fresh exposures may be considered on weakness.

The recent price patterns confirm the earlier view that mid-cap stocks would continue to attract market interest at the expense of large-caps. Investors may stick to fundamentally-sound mid-cap companies as they appear to have potential to yield relatively better returns over the next few quarters.

Nifty (4,318.3): A positive trend prevailed and the index moved past the bullish trigger level of 4,300 mentioned in earlier weeks. The index is now on track to move to the target zone of 4,450-4,460. The short-term support is at 4,230 and the more critical support is at 4,130.

Only a weekly close below 4,130 would indicate the onset of medium-term corrective phase. As stated earlier, price weakness may be used to take long positions in fundamentally sound mid-cap stocks. 

CNX Bank Index (6,740.1): The banking index staged a breakout and moved to new historic high on Friday. The outlook is bullish and the index could move to 7,100-7,150 in the near term. The positive outlook would be invalidated on a close below 6,450.  Long positions may be considered on weakness with a stop loss at 6,450.

Key pivotals:
Larsen & Toubro (Rs 2,198): The price movement during the week validated last week’s bullish view. The stock is on course to move to the target zone of Rs 2,300-2,350 mentioned last week. The positive view would be negated on a close  below Rs 1,910. Fresh long positions may be considered on weakness with a stop loss at Rs 2,050. Long-term investors may settle for stop loss at 1,950.

BHEL (Rs 1,538): The stock was one of the star performers last week. The outlook is bullish and a move to Rs 1,650-1,700 is the favoured view. The short-term outlook would be bullish as long as the immediate support at Rs 1,420 is not breached. Short-term traders may consider long position on weakness with a stop loss at 1,420. The medium-term trend would turn bearish only on a close below Rs 1,300.

Tata Tea (Rs 857): After a prolonged period of correction, the stock
appears to have commenced the next leg of uptrend at  Rs 560 in March. The short-term outlook is bullish and  a move to Rs 900-910 appears likely. Have a stop loss
at Rs 820 for trading positions. Long term investors may settle for a stop loss at Rs 795.

Stock of the week:
Karuturi Networks (Rs 189): The stock is in a major uptrend and could move to Rs 235-240 range in the near term. The pick-up in volume and the rise in price witnessed in the last couple of days is indicative of the start of the next segment of the upward move. The bullish view would be valid as long as the major support at Rs 165 is not breached on a closing basis.

Short-term traders may settle for a stop loss of Rs 174. Though a breach of Rs 174 would be an early sign of weakness, it would not negate the possibility of a rally to Rs 235-240 range. Only a close below Rs 165 would negate the bullish view.

 (Note: The analysis and views expressed in this column are based on the technical analysis of historical share price action. There is a risk of loss in trading. Views and targets are arrived at by using the Elliott Wave Theory and Point & Figure technique. The author does not have investment exposure in the stocks discussed above.)
bkrish16@gmail.com)