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B. Krishnakumar

NIFTY (1778.6)

Preferred view: The index ruled firm in line with last week's expectations. The improved market sentiment helped the index move comfortably past the target zone of 1725-1730 that was mentioned in the previous week.

The overall outlook remains positive. Though intermittent short-term corrections are not ruled out, the index is likely to move to the 1870-1900 range. A drop below 1630 would negate the short-term positive outlook.

Comment: After a strong rally on Monday, the index was confined to a narrow range in the next couple of trading sessions. The expectation of a huge interim dividend payment from public sector undertakings (PSUs) resulted in a sharp rise on the last two trading days of the week.

The recent rally has helped the 14-day RSI move past the crucial resistance level at 70. This is a positive development and confirms the bullish outlook.

The Nifty, however, is moving deeper into the overbought region in the weekly chart. The indicators on the daily chart are however yet to reach extreme levels.

This lends credence to the expectation of the rally to the 1870-1900 range. While the near-term outlook remains positive, last week's view that the index is in the final stages of the rally is valid.

After the expected short-term rally, the index would turn overbought in the daily charts as well. This could probably act as the trigger for the much-awaited correction.

A significant correction, both in terms of time and magnitude, would materialise on the completion of the ongoing rally.

Alternative view: Though a short-term uptrend is the preferred view, a close below 1630 would negate the positive outlook. A close below this level could pave the way for a prolonged correction in the index.

SENSEX (5541.4)

Preferred view: A bullish trend prevailed as expected last week. The index ruled firm and managed to move past the target zone of 5400-5450. The near-term trend remains positive. A move to the 5750-5800 range appears likely. This view would be invalidated if the index drops below 5050.

Comments: After a strong trend on Monday, a "Doji" candlestick pattern was evident on Tuesday and Wednesday. The indecision in the market, reflected by the formation of the "Doji" pattern, was resolved on Thursday. The index moved up to close above the 5500-point mark on Friday. The overall trend remains positive and the indicators on the daily chart confirm this view.

Alternative view: While the short-term outlook appears positive, the index appears to be headed towards a significant top. The RSI indicator in the monthly chart has moved past the 76 level, after a gap of about nine years. Typically, when an indicator reaches such an extreme zone, a sharp and quick reaction would follow immediately. A break below 5050 would be an early indicator of the onset of the downward corrective phase.

S&P CNX 500 (1450)

Preferred view: The index moved in sync with other major market indices. Similar to the Sensex and Nifty, the CNX 500 index, too, moved past the target zone of 1410-1420. The near-term trend is positive and a move to the 1500 level is not ruled out. The positive view would be negated only if the index drops below 1310.

Comments: The mid-cap stocks recorded a sharp upmove last week. The likes of Sundaram Clayton, Thomas Cook, Carborundum Universal, Igarashi Motors and Saregama India were prominent gainers of the week. The positive outlook for quite a few mid-cap and index stocks indicates that the index could seek higher levels.

CNX IT (22645.8)

Preferred view: The index ruled firm in line with earlier expectations. It also managed to move as the target zone of the 22500-22600 range. The near-term trend is positive and the bullish outlook for technology stocks confirms this view. A rally to the 23500-24000 range appears likely. Only a drop below 21000 would negate the positive outlook.

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