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B. Krishnakumar

NIFTY (1946.05)

Preferred view: The market sentiment remained distinctly positive during the just concluded week. The New Year commenced on a very positive note for equities. The Nifty ruled firm as anticipated last week. The index managed to move past the target zone of 1870-1900 that was mentioned in the previous week.

The near-term trend appears positive. A move to the next target zone of 2025-2050 appears likely. A drop below 1850 would, however, impart weakness and should be considered as a forewarning of an impending corrective phase.

Comment: The news pertaining to the disinvestment of government stake in ONGC and Gas Authority imparted positive sentiment. Banking and commodity stocks also staged a rally last week. The recent upmove has pushed the oscillators and indicators deeper into the overbought region.

However, in a strong uptrend, it is not unusual for the indicators to hover in the overbought region for a considerably long period of time. Such a situation normally arises when the index gets extended in each and every segment of the upmove. As a result, the correction would appear short-lived and the main uptrend resumes immediately.

Alternative view: While the near-term trend appears positive, the upward move cannot go on without at least a corrective phase. The market needs to take a breather, and if it comes about sooner than later, it may be healthy. A drop below 1850 would indicate the onset of the corrective phase.

SENSEX (6026.6)

Preferred view: As anticipated, a bullish trend prevailed last week. The index ruled firm and also moved to the target area of 6000-6100 range that was mentioned earlier. The index appears to have more room to be covered on the upside and a move to the 6150-6200 range is not ruled out. Only a close below 5700 would blunt the positive outlook.

Comments: The index hit a new closing high last week with a close above the 6000-point mark for the first time. It appears poised to breeze past the earlier historic high of 6151 recorded in February 2000. However, with quite a few index stocks reaching overbought levels, how far and how long the rally lasts are increasingly becoming crucial questions. But, till such time there is a clear indication of the onset of correction, it would be better to remain invested with a trailing stop loss in place.

Alternative view: With successive upmoves getting extended into smaller waves, the rally has managed to cover a substantial ground on the upside without any major correction. However, even when the upmove gets extended by sub-dividing into smaller segments, the rally has to halt at some point. There is, however, no such indication as of now.

S&P CNX 500 (1609.3)

Preferred view: The index moved in line with other major indices. The sharp upmove in quite a few large and mid-cap stocks imparted buoyancy in the index. As a result, the index managed to move past the target zone of 1600 that was mentioned last week. The near-term trend remains positive and a move to the 1680-1700 range appears likely. The positive view would be invalidated only if the index drops below 1505.

Comments: Along with a host of pharma sector stocks, KEC International, Gail, ONGC and Indian Oil Corporation were prominent gainers of the week. Shares of companies in the commodity business, such as ACC, Hindalco and Tata Steel, too found buying interest. The outlook for quite a few stocks, such as Mahindra & Mahindra, GSFC, Escorts and Elder Pharma, appears positive.

CNX IT (23987.2)

Preferred view: Similar to other indices, this index too managed to breach the earlier mentioned target zone. However, the rally lacked the momentum that was evident behind the upmove in other major indices. Though the index has moved past the positive trigger level of 23400, the upmove does not appear convincing. A drop to a level below 23000 would impart weakness. The index could see a laboured upmove as long it hovers about 23000.

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