The Hindu Business Line : Index Outlook

It was a quiet week devoid of any major news. The market players in India relieved their boredom by playing a guessing game. The game was to guess when the Sensex would touch 12000.

The Sensex was, as ever, at its wilful best, hitting an intra week high of 11983.4 before reversing; generously allowing this innocuous pastime to be carried on for yet another week. The tally of successive weekly up closes has now extended to seven.

Though the Sensex closed the week with a gain of only 1.2 per cent, the BSE Midcap index gained 4 per cent, and the BSE Smallcap index gained 3.7 per cent indicating shift of focus from the frontline stocks.

The volumes stagnated through the week. The 12000-level appears to have unnerved the FIIs and mutual funds as they turned net sellers.

The domestic traders and retail participants are currently playing the atlas, and very successfully too. The sentiment is turning a trifle too positive as is displayed by the creeping up of open interest in the derivatives segment.

There is a slow-down in momentum in the short term. But, the weekly charts are not showing any signs of weakness yet. The sideways market witnessed last week keeps our outlook for the market unchanged.

The intermediate term uptrend, which started from the low of 8800 in the Sensex is still continuing. We are still with the view that this move is part of a correction that started from the top of 12671 in the Sensex.

There is a famous adage that goes "If you feel that there is something not quite alright with the market, it is most likely to be in a B wave".

As explained before, it is difficult to pinpoint the exact place where a B wave can end. It can rise above the beginning of A wave also, which in this case is 12671.

We are, however, nearing 12015, which is the second target for the third leg from the low of 8800. It is best to be extra cautious at this juncture as the next wave down has the minimum downward target of 10504 (we do not want to dwell on the subsequent targets just yet). The Sensex can move higher to 12091 or even 12256 this week. Traders can buy in dips till the Sensex is above 11550. Investors should, however, stick to the sidelines and wait for a firm close above 12200 before contemplating fresh buys.

Nifty (3471)

The Nifty reversed from an intra week high of 3490.9 to close the week with a minor gain of 1 per cent. It was a flat, sideways move witnessed there. The immediate upward targets this week are 3514 and then 3546. The upper ceiling this week is likely to be at 3582. The stop for traders should be at 3370. The support level for the medium term is at 3250.

Global Cues

Equity markets across the globe were playing a more complex guessing game last week involving, inflation, recession, crude prices and geo-political tensions. Most markets moved sideways while selling was witnessed in European and some Asian markets such as Hongkong, Malaysia and Thailand. Nymex crude for October delivery closed at $66.2 providing a reason for markets to rally. The next support lies at $64. Base metals moved higher.

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