Auto, Banking Sectors Lead Rally In Budget Week

The Budget week lived upto its reputation of being a volatile one. Volatility began on the Budget day itself as Nifty rallied initially, only to give up most of its gains. But, the day after saw a one sided up move of around 200 points as Nifty moved past 5500. Overall, it was a good week for bulls as indices rallied over 4%. This came against the backdrop of higher Crude prices and a lukewarm Budget. But, the fact that there were no expectations whatsoever from the Budget and there were short positions going into the Budget helped the markets. Auto, FMCG and Banking indices were the top three gainers for various reasons associated to Budget. There were no sectoral losers but the least gains were seen in IT and Oil and Gas. Nifty crossed 5600 briefly on Friday before selling set in at higher levels. Markets have seen a decent rally post Budget but now we are placed just around the strong resistance zone of 5550 to 5600. As mentioned earlier, it may not be easier to take out this resistance in one go. But, we do believe that market has made a sustainable bottom around 5230 and for the first time since November 2010, we have a higher bottom and now higher top( 5608 on Friday). The resistance at 5600 is likely to be taken out eventually maybe over next 5-7 trading sessions. Any correction should find initial support around 5440-60 and then a strong one around 5350-5375. The second level is unlikely to be breached and positional traders could take long positions on declines in Nifty as well as bullish counters with positional stop loss below 5340. Clear breakout is seen above 5625 with potential targets of 5770 and around 5900. Banks and Autos have been the leaders in the current rally. One needs to be selective in Autos and we see positive bias in Bajaj Auto and Hero Honda (above 1560). Banking is looking to be in a better shape and one can use dips to accumulate stocks like HDFC Bank, SBI, Yes Bank, Indusind Bank, Allahabad bank, OBC, Canara Bank and BOI. Another important thing to note is that once Nifty stabilizes above 5625 short covering could lift the weaker sectors like Infra and Realty too. Certain other counters that are looking positive and are Buy on dips candidates are L&T, IDFC, Havells, Cairns and Sterlite.

Nifty has immediate support around 5445-60 and then around 5375-5400 while resistance should be seen between 5570-5610.