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B. Krishnakumar

NIFTY (1796.1)

Preferred view: The movement in the Nifty does not still provide any conclusive evidence of a near-term trend. The index is unable to close above the crucial trigger level of 1900. The trend last week was distinctly bearish. This has pushed the index closer to the crucial support level at 1765. A drop below this level would result in the index testing the 1730-1740 range. A decline below 1740 would have negative implications.

As indicated earlier, the index has declined to the 1800-1810 range. The recent price pattern indicates that the downtrend is not, as yet complete. A drop to the 1740-1750 range appears likely. Holders of long positions, especially in index stocks, may look for avenues to reduce holdings. It would be better to stay away from volatile stocks till the election results are announced and the profile of the new government becomes clear.

Comment: The sentiment remained bearish during the just concluded week. Exit poll findings from the first two phases of elections acted as the negative trigger for the market. The flow of earnings announcement from the likes of Hindustan Lever and Reliance added to the bearish sentiment.

A few indicators on the daily price chart indicate the possibility of a further decline. The 14-day RSI, for instance, is unable to move past the levels of 60-65, which is a typical resistance zone in a bearish trend. It has reversed from this range on more than two occasions in recent weeks. This is a cause of concern; a strong uptrend may resume only if the RSI indicator moves past this zone.

Alternative view: The earlier outlook remains valid as the recent price action has not been significant enough to alter it. The long - term outlook is still bullish. From a near-term perspective, a drop below 1760 would impart weakness and a test of 1670 may turn out to be a possibility. The long-term uptrend is, however, likely to re-establish itself on the completion of the downtrend.

SENSEX (5655.1)

Preferred view: The movement was similar to that of the Nifty. The overall sentiment remained bearish with price declines in Reliance, Hindustan Lever and oil sector stocks causing much of the damage. The index was unable to move past the crucial positive trigger level of 6000. The recent price action indicates the continuation of the weak trend.

The index has dropped below the bearish trigger level of 5740 mentioned a couple of weeks ago. This confirms the weak outlook for the near term. As observed earlier, the breach of 5740 may now push the index to the 5500-5550 level.

Alternative view: While near-term trend appears negative, a move past 5900 would be an early sign of the reversal of the recent downtrend. The expected weakness will not, however, negate the long-term positive outlook.

S&P CNX 500 (15070.6)

Preferred view: After break above the resistance zone at 1550-1560, the index went on to touch a high of 1607. It has turned weak over the past few trading days.

The inability of the index to hold above the resistance zone at 1550-1560 is not a positive sign. The near-term trend remains weak and a drop to the 1430-1440 range appears likely. Only a move past 1590 would have positive implications for the index.

CNX IT (20687)

Preferred view: After moving closer to the earlier mentioned target zone of 22500-22600, the index has turned weak over the past few days. There is a possibility of a near-term uptrend. The index could, however, face strong resistance at the 21200-21300 range. Only a close above 21600 would reinstate positive outlook. A drop below 20400 would result in a drop to the 19500-19600 range.

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