The stock is showing negative bias for the short term. HDFC Securities recommends investors to sell IRB Infra at CMP for a price target of Rs185 and with a stop loss placed at Rs266 in 3-4 weeks.

1. RETAIL RESEARCH
Observation:
 Week’s action formed a bull candle on weekly chart which indicates bulls are in momentum but further momentum
could continue only on rise above 7841.
 From the perspective of wave, one major impulse leg has ended at 6343 levels which is marked as “wave i”, the rise
from 5118 to 6343 had clear five wave structure (internals labeled as i-ii-iii-iv-v). After the end of “wave i” Nifty fell
and “wave ii” has ended at 5933; which is a “complex corrective pattern”-(Double combination internals are W-X-Y).
Then major “wave iii” is opened up from the low of 5933 and ended at 7808. The major wave iii’s internals are - the
rally from 5933 to 6870 was a clear impulse which was marked as “wave i of wave iii”. And the corrective leg for the
impulse was from 6870 to 6638 which was marked as “wave ii of wave iii”. The rise from 6638 to 7564 marked as
“wave iii of wave iii”. Minor correction from 7564 to 7217 was marked as “wave iv of wave iii”. Then the last rise from
7217 to 7841 was marked as “wave v of wave iii” where the Major “wave iii” has ended. The level of 7841 is the short
term top for the index.
 Now index is in the progress of Major downward “wave iv” and we are just in the beginning of the corrective leg.
Initially we are giving down side retracement targets of 7140 - 6910 (38.2% or 50% retracement of the entire wave
iii). Right now we have one clue which is that the progressing corrective leg is simple correction (either Flat [3-3-5] or
Zigzag [5-3-5] or Triangle [a-b-c-d-e]) as major “wave ii” was complex. However in any case index could slide down
towards 7150 – 6950 but the internals may differ. This view would under risk if index moves above 7841.
 Minor changes have been made in the internals as a very rare pattern of “Expanding Triangle” occurred in the last leg.
And it’s slightly tough to project the top reversal and major corrective leg of about 700/900 points in the index is due.
Already inter-market divergence has been witnessed between Nifty & Midcap index which is the clear sign of the
corrective leg, same divergence happened in the corrective leg in December 2013 to January 2014.
RETAIL RESEARCH
Weekly Nifty and Sector Technicals
July 26, 2014
Nifty Perspective Support Resistance 200 Day EMA Weekly Pick
7790.45 Bearish 7650 - 7442 7841 - 7890 6788 IRB Infra

2. RETAIL RESEARCH
S&P CNX Nifty Daily
Observation:
 Day’s action formed a Hammer candle at the resistance zone which is third consecutive bearish reversal candle on the
daily chart, this indicates the major top reversal is likely.
 Technically, as we had indicated the expanding triangle has ended at 7841 as it moved below the reversal level of 7770
on intraday basis but closing below it would be more convincing.
 Price has closed exactly at the minor rising channel and it likely to breach the channel setup which is additional
strength to the bearish stance.
 Finally the most significant top reversal pattern expanding triangle seems to have ended at 7841; however one more
falling day would add more strength to the view.
 The last rising leg of the pattern which is “wave e of wave v of wave III” has completed and the major corrective “wave
IV” is in progress and the downside target is placed below 7100 mark.
 Diverging Phase in the USDINR & Inter-Market Divergence in NIFTY, MIDCAP & SMALLCAP index is showed in the next
page.

3. RETAIL RESEARCH
USDINR inverse relationship - Diverging Phase
Observation:
 In general USDINR & Nifty has inverse relationship in major trends.
 From May 09, 2014 many major news and event were lined up and large buying interest was seen in the market till the
event day (election result).
 After the event day the divergence has started and Rupee & Nifty are moving in the same direction in the larger
degree.
 This divergence of inverse relationship cannot last long and either the Nifty has to start falling or the USDINR has to
start falling. As we have commented in our other reports, USDINR is temporarily headed towards 62.50-63 levels; this
along with our Elliott wave count on Nifty discussed in the earlier pages means that Nifty is headed lower.
 The key indication is that basically index has to move below the event day’s low to cancel out the complete divergence
phase which is below 7130.
 After the correction is complete, a new Bull Run (resulting in sharply higher tops and higher bottoms) could begin
when the USDINR could be headed lower.

4. RETAIL RESEARCH
Inter-Market Divergence in NIFTY, BSE MIDCAP & BSE SMALLCAP Indices
Observation:
 The above chart shows the inter-market divergence between NIFTY, BSE MIDCAP & BSE SMALL CAP Index.
 Basically the inter-market divergences are rare key indication for major trend reversal.
 This was witnessed (whereas Nifty continued to rise, the other two indices started to fall) between January 01, 2014 to
January 24, 2014, post which Nifty has corrected about 400 more points.
 The larger period divergences were witnessed from December 2013 to January 2014.
 That correction is a part of major “wave ii” which ended at some 40% of “wave I”.
 The present expected correction is “wave iv” as per the rule of alteration the “wave iv” would be same or more than
40% of “wave iii” (Rise from 5933 to 7841).
 Rule of Alteration: If “wave ii” is small then “wave iv” large and vice versa.
 So the expected correction would be more than 700/900 points in the index.

5. RETAIL RESEARCH
Sector Participants for expected fall
 Above BSE sector charts (Clock wise) are BSE Bankex, Capital Goods, Metal, Oil & Gas, Power and Realty.
 In our report dated on May 10, 2014 we had mentioned that the above sectors would be the best ones to participate
in the expected up move.
 Two weeks back when index was at 7808, we had stated that these sectors could participate in the expected down
move. Last week index has made a new high but none of the above major sectors made a new high.
 So the earlier view & downside targets remain the same.
 Bank index is extremely weak and it could slide down towards 15500 – 14500 levels.
 Capital Goods index has completed two clear five wave advance with rising channel setup and now it is retracing last
leg towards 14000 – 13000 levels and on an outer extent to 12400.
 Metal index has made short term top at the high of 14102 and now it is in the progress to fall below 12000 mark.
 Oil & Gas index has already retraced 38.2% of the last rising leg but price has more downside room up to 10100 – 9700
levels which are 50% & 61.8% retracement levels.
 Power index has good potential to test the retracements levels of 38.2% (2500) & 50% (1950) levels.
 Realty index is sliding down directly towards 50% retracement levels which is placed 1740 levels.

6. RETAIL RESEARCH
Weekly Pick
Stock Pick
IRB Infra
CMP : 249.55
Recommendation
Sell : Sell at CMP
Stoploss : 266(Close)
Target : 185
Time : 3-4 Weeks
Observation
 The stock is showing negative bias for the short term.
 Channel line breakdown has been witnessed which indicates
that the Bull Run has ended.
 Price has topped out at the cluster resistances which are
reaction line, channel line and 361.8% projection level of the
last two major legs.
 Major wave III/C has ended at 275.5 and now major wave IV/X
is in the progress. The corrective leg is a Flat pattern as it
subdividing as 3-3-5.
 Strong negative divergence has been witnessed in RSI.
 Traders could short the stock at CMP with the stoploss of
249.55 on closing basis for the target of 185.

7. RETAIL RESEARCH
Note: Once the market opens for trade, the analyst will review it and decide to give the call through an internal mail/SMS at the same or different levels of entry, target and stop loss or not give
the call at all or give a call in Futures/call/put. Clients could get in touch with the analyst through their designated dealers to check about this.
Analyst: Gajendra Prabu (gajendra.prabu@hdfcsec.com)
HDFC securities Limited, I Think Techno Campus, Building ‘B’, “Alpha”, Office Floor 8, Near Kanjurmarg Station, Opposite
Crompton Greaves, Kanjurmarg (East), Mumbai – 400042, Fax: (022) 30753435
Disclaimer: This document has been prepared by HDFC securities Limited and is meant for sole use by the recipient and not for circulation. This document
is not to be reported or copied or made available to others. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. The
information contained herein is from sources believed reliable. We do not represent that it is accurate or complete and it should not be relied upon as such.
We may have from time to time positions or options on, and buy and sell securities referred to herein. We may from time to time solicit from, or perform
investment banking, or other services for, any company mentioned in this document. This report is intended for non- Institutional Clients only