Book profit in Reliance, Dabur

B. Krishnakumar

THE market was confined to a narrow range last week. With a truncated trading settlement, business volume too was at a low ebb.

The lack of sustained upside momentum and the consequent inability of the Sensex to move past the key resistance level of 3,930 are indicative of the underlying weakness in the market. This essentially means that the Sensex still has some downside risk, with the test of the previous low of 3,492 being a possibility.

On the upside, the Sensex faces stiff resistance at around the 3,875-3,900-range. Given that the market has almost reached the top of the current upward cycle, a short-term weakness could set in, which could probably push the Sensex down to lower levels. In this context, it would safer to book profits and trim long positions in key index stocks.

The focus this week is on Dabur India, Reliance Industries and PentaMedia Graphics. The near-term outlook for Dabur India and Reliance Industries appears to be weak while PentaMedia Graphics could see a short-term rally. Existing holders of Dabur India and Reliance could use price rally to clip exposures while fresh long positions may be contemplated in PentaMedia Graphics with a stop loss at or below Rs 323 with an upside price objective of Rs 380.

As mentioned earlier (refer edition dated September 24), the share price of Dabur India (Rs 635) has bounced back just above the support level of Rs 550. The rally in the recent weeks has pushed the stock to the key resistance zone of Rs 675-690.

It turned weak after touching a high of Rs 679 on Friday. Existing holders could cut exposures in the stock. Fresh short positions may also be contemplated with a tight stop loss.

Reliance Industries (Rs 304.3) has seen a firm trend in the recent days, pushing the stock to the top of the current upward cycle.

The share price could touch the Rs 318-level if the overall stock market sentiment remains positive. In any case, existing holders could cut exposures while fresh short positions may also be contemplated on evidence of weakness at around the Rs 318-level.

Recommendation follow-up

The price action in Tata Tea and Tata Steel (Tisco) was broadly on course with last week's recommendation.

The Tata Tea stock failed to move past the resistance level of Rs 190 mentioned last week. As expected, it ruled weak and touched a low of Rs 169.1 to close at Rs 172.1. The underlying sentiment in the stock continues to remain weak and a further decline is not ruled out.

Existing holders could use price rally either to go to or past Rs 175 to cut exposures in Tata Tea. Fresh short positions may also be contemplated with a tight stop loss.

The share price of Tata Steel bounced back at the price level of Rs 94-95 mentioned last week. After touching a low of Rs 95, the scrip reversed direction and scaled a high of Rs 102 on Friday. The short-term trend in the stock continues to be positive and existing holders could contemplate profit booking at or above Rs 105.3. Fresh short positions may also be contemplated on evidence of resistance above Rs 106.

(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.)