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B. Krishnakumar

NIFTY (1837.05)

Preferred view: As anticipated, the index ruled firm and also moved past the all-time high of 1818. Technically, there is no resistance level for the index as it has moved into unchartered territory. The near-term trend remains positive. A move to the 1870-1900 range appears likely. Only a drop below 1750 would negate the short-term positive outlook.

Comment: Aided by positive sentiment towards old-economy stocks, the index closed at a new historic high of 1837.05 on Friday. The largely uninterrupted rally over the past six months has, however, pushed the index deeper into the overbought territory. In the daily chart, the Nifty is yet to reach extreme overbought levels. In the weekly charts, however, it has reached extreme overbought reading levels, which is not a positive signal.

Though it is quite normal for the indicators to remain at the overbought level during a strong uptrend, such a situation does not normally last for a long time frame. Though a correction is likely, it does not necessarily mean that the market would face a downside risk immediately. Even a sideways correction could develop, which would help the indicators correct themselves.

Alternative view: A drop below 1750 would indicate the onset of the corrective phase. Price declines, however, ought to be viewed as an opportunity to take equity exposures as the long-term trend is still bullish.

SENSEX (5699.3)

Preferred view: In line with expectations, bullish trend prevailed last week. The index ruled firm and moved closer to the price target of 5750-5800 that was mentioned earlier. The near-term outlook remains bullish and a move to the 6000-6100 range appears likely. Only a close below 5450 would blunt the positive outlook.

Comments: Unlike the Nifty, the Sensex is still 450 points adrift of the earlier all-time high of 6151 recorded in February 2000. The index, however, appears on course to breach this level. The key indicators in the daily chart such as the RSI and MACD indicate that there is still some room to be covered on the upside. This lends credence to the view of the continuation of the bullish phase in the near term.

Alternative view: The much-awaited correction continues to remain elusive. The indicators are being stretched to overbought region. This trend cannot continue for long. A significant correction, both in terms of time and magnitude, has to fructify for the index to realign with the indicators and the moving average. It, however, remains to be seen if the correction turns out to be a sharp drop in value or is characterised by a sideways consolidation pattern.

S&P CNX 500 (1496.4)

Preferred view: The trend in the index was in alignment with other major market indices. Similar to the Sensex and Nifty, CNX 500 index too ruled firm and moved the earlier projected target zone of 1500. The near-term trend remains positive and a move to the 1600-level is not ruled out. The positive view would be invalidated only if the index drops below 1450.

Comments: The sharp rise in PSU stocks along with the firm price trend in cement and steel sector companies imparted buoyancy in the index. Birla Corp, BEML, Tata Steel, Larsen & Toubro, Aftek Infosys and Coromandel Fertilisers were prominent amongst the numerous gainers of the week. The positive outlook for quite a few stocks such as Tata Tea, Bank of India, Mahindra & Mahindra, ACC and Gujarat Ambuja Cement strengthens the case for the continuation of the recent uptrend.

CNX IT (22992.5)

Preferred view: Though the index ruled firm, the buoyancy witnessed in other indices was not quite evident in the case of CNX IT Index. The target zone of 23500-24000 that was mentioned last week remains valid. The price trend in the next few days would, however, be critical in determining the near-term outlook. While a move close past 23400 would be a positive signal, a drop below 21500 would impart bearishness.

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