The Hindu Business Line : Pare exposure in HPCL, SBI

EXCEPT for a modest rally on Wednesday, the stock market sentiment remained weak in the remaining three days of the week. Led by the firm trend in American market on Thursday, the stock market across the globe ruled firm on Friday. The positive sentiment could not quite be captured in domestic market owing to market holiday on Friday.

Sensex (3108.24): In line with last week's expectations, the Sensex ruled weak and moved closer to the target zone of 3050-3075. The overall outlook for the Sensex does not appear all that positive. The index could move up in the near term, which, however, would be a relief rally in the context of a bearish market.

As mentioned last week, a drop to the support band of 3050-3075 appears likely before resumption of any meaningful rally. As of now, only a close above 3200 would warrant a re-examination of bearish outlook.

The focus this week is on Hindustan Petroleum (HPCL) and State Bank of India. The near-term outlook for both the stocks appears negative. Existing holders could reduce exposures while aggressive traders could go short on price upmoves with a close stop loss in place.

HPCL (Rs 283.3): The share price of the company could drop to the Rs 240-250 range in the next few weeks. Though there is a possibility of intermittent upward moves, the overall trend appears weak. Existing holders could reduce exposures while price move towards Rs 292-295 could be used to take short position with a close stop loss in place.

SBI (Rs 275.35): The overall outlook for SBI appears bearish. The scrip could, however, stage an upward move in the near term. Existing holders could use price upmoves to reduce exposures while short positions could also be contemplated with a close stop in place if the scrip rises to the Rs 290-295 range.

Recommendation follow-up

The price movement in index heavyweights Reliance Industries and Tata Steel was in line with last week's expectations. As anticipated, the share price of both the companies ruled weak. The two companies appear on course to slide to the target price levels mentioned last week.

Reliance Industries (Rs 278.6): Except for a strong rally on Wednesday, the scrip ruled weak in the remaining days of the week. Going the recent price movement, the share price of Reliance could move up in the next few days before resuming the downtrend to the Rs 260-265 range. Existing holders could use upmoves to reduce exposures. A drop below Rs 273 could be used to take fresh short positions.

Tata Steel (Rs 135.15): Similar to Reliance, the share price of Tata Steel too appears to be on its way towards the earlier mentioned price target of Rs 120-125. Existing holders of short positions may place a stop loss at Rs 150 while a drop below Rs 133 could be used to take fresh short positions.

(Note: The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. Analysis and price targets are based on the Elliott Wave Analysis. There is a risk of loss in trading)

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