Nifty may consolidate at current levels, short term outlook bullish - 13th June 2010

The last week has been good for Indian Stock Markets where markets have gained almost 1%. It has been third consecutive weekly gains for the markets which will give confidence to the bulls. BSE Sensex has closed above the psycological levels of 17000 which will provide good technical support to the Indian markets.

Provisional data for Friday indicate net buying from Foreign Institutional Investors (FIIs) in tune of Rs. 800 crores. In Derivatives segment too, FIIs have been net buyers in Index and Stock Futures by around 1500 Crores which will further give heart to bulls and sleepless night to bears.

Technically, Nifty is able to breach 5100 levels comfortably on Friday and hence now, 5070-5100 now acts as a strong support zone. Its the fourth time in last 3 months that Nifty has breached this level. Last three times, it breached this zone and then again went down. On Friday as well, we have seen some selling coming in 5150 levels but Nifty is still able to hold 5100 levels.

Traders who are planning to take fresh positions in Nifty may buy Nifty futures in 5100-5110 levels with stop-loss @ 5140 and Stop-loss at 5180. Though the opportunity has equal risk and reward but the risk seems less in trading perspective as Nifty has breached 5060 levels on strong volumes and hence coming back down to these levels seem unlikely during the short term.

We have yet another pair-trade strategy for you. Mahindra & Mahindra has been doing pretty well and has gained more than 15% since stock-split two months back and now likely to face strong resistance. On the other side, Tata Motors has declined by around 5% in last 3 months. Hence, one may can now sell 2 lots of M&M and buy 1 lot of Tata Motors with an anticipation that gap between them now likely to reduce. One may take this position at the current levels and come out of the position in the following cases:

• Tata Motors reaches 815 on the upside / goes below 715 on the downside.
• M&M reaches 650 on the upside / goes below 565 on the downside.

Wishing you a great trading week ahead!!!