Technical view by Nooresh

Metals for bounce/Mid-cap Banking for medium term…. Sensex 16850/17250 resistance on upside.

Sensex Technical View:

Sensex made a low of 15960 ! which is approximately close to my worst case scenario of 15900. And as expected we have seen a sharp bounce from that zone. In my chart of probable Sensex move the minimum bounce should be somewhere closer to 50/61% retracement of the current downmove which comes to roughly 17000-17250.

Time wise i would expect such a move to be complete by June 2nd week. So we would review at 17k+ or in June 2nd week on the index moves. Also if you see in my report – Time to be Optimistic have clearly mentioned the importance of a strong bottom being formed in the next 3 sessions as per time analysis chart. Index has pulled up 700 points from the 3rd day after the report.

Short term resistance seen at 16850 ( Trendline Resistance ) and 17200-17250 ( 61% retracement of the downmove)

People who would have taken the call of taking leveraged index/stock longs at 16000-16400 would now be rewarded with good gains ( I also sent this message a couple of times on our yahoo/sms list – if you want to get into it mail to with your full details)

Look to book half qty at 16800-16850 to reduce the leverage used as well as to take some profits of the table.

Fundamental Analysis Help needed:

As i have been very bullish on the midcap banking space technically for the last 1-2 days i was wandering on how long would it take for the consolidation of banks, what valuations would be given, Implications of takeover rumours.

Accordingly the banks possible for takeover in midpcaps are Lakshmi Vilas Bank,Karnataka Bank, DCB, Dhanlaxmi Bank.

ICICI has given a valuation of 6.5 crores per branch and price to book of almost 5.Although this is very high for a bank of such repute ( BOR was in SEBI /RBI issue many times) so this has set tone for any possible takeovers and even a buzz of takeover could take stock prices to zoom.

Many of the above banks for example Karnataka trades at price to book of 1.16 , div yield of 4 % and a market cap of 2000 crores. With a branch network of 464 almost same to BOR there is a scope of 50% rise in case of takeover and maybe assets would be better then BOR. ( technically good so is a buy call too already though and a favorite)

Above is a quick analysis but i would suggest readers who are fundamental analysts should help me out in selecting good stories in the sector.

Stocks to watchout for :

Divis Labs looks hot if crosses and stays above 730. Expect a quick move to 800.

ITC could do 282-285 in short term.

Sesa Goa and Hindalco have started the pullback in metals as expected. ( Recommended on yahoo at 310 and 140 will book tomorrow)

Its time for Sterlite Inds and Tata Steel to now do a quick 5 % + move.Jindal Steel also looks good.

Expect midcaps/smallcaps index to recover sharply tomorrow.


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Article by Nooresh Merani

Nooresh has written 2531 articles.

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