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B. Krishnakumar

NIFTY (1582.4)

Preferred view: The market sentiment remained distinctly bearish during the week gone by. As anticipated, the index ruled weak and is now ruling close to crucial support level at 1570. A break below this level would result in a test of the 1340-1350 range. Going by the recent price action, it appears that the bearish trend would prevail for a while.

The index broke out of the trading range that it has been confined to in the recent weeks. As emphasised in earlier weeks, a sharp move ensued in the direction of the breakout. Taking into account the momentum behind the fall, the probability of the index dropping to the 1340-1350 range appears high.

The Nifty and quite a few index stocks appear to be in the third leg of a corrective phase. A significant upmove would ensue on the completion of the ongoing segment of the downtrend.

Comment: It was one of the worst weeks for the stock market in the recent years. A series of election related developments affected market sentiment. This resulted in a massive 13.7 per cent drop in the Nifty in the past five trading sessions. The index has not been so severely battered on too many occasions in the past. As mentioned a couple of weeks ago, the breach of 1740 imparted negative sentiment. A look at a few indicators on the daily and weekly price chart indicates the possibility of a further decline. About nearly a year, the index has dropped below the crucial 200-day moving average, which is not a positive signal. The moving average is now positioned at 1649.

The movement in the 14-day RSI is portrays a bearish picture as well. The indicator has dropped below the 30-level which is not a positive sign. Though this could result in a short-term bounce, the medium-term trend is not positive. Only a move past 65 would reinstate positive trend. In the weekly chart, the index is hovering just around the support at 40. A breach of this level would be another cause of concern.

Alternative view: While the near-term outlook remains weak, a move past 1760 would be an early indicator of the start of a new uptrend. The recent carnage has not disturbed the earlier long-term bullish outlook for the market. The bullish trend would resume on the completion of the ongoing decline.

SENSEX (5069.9)

Preferred view: The movement in the index was similar to that of the Nifty. Apart from overall weakness in index stocks, the sharp slide in the public sector stocks caused extensive damage to the index. The near-term outlook for the index does not appear positive. As observed in earlier weeks, a test of the 4800-4850 range appears likely. Breach of 4800 would result in the test of the 4650-4700 range.

Alternative view: While the near-term trend is weak, a move past 5500 would be an early sign of the reversal of the recent downtrend. As iterated in earlier weeks, the expected weakness will not, however, negate the long-term positive outlook for the market.

S&P CNX 500 (1309.9)

Preferred view: The chart pattern in this index is not too different from that of Sensex and Nifty. After a sideways consolidation, the index broke down sharply. The index could drop to the 1200-1210 range in the near term. At the moment, only a move past 1450 would impart bullish momentum.

CNX IT (20258.1)

Preferred view: Amidst the recent bloodbath at the market, this index managed to withstand carnage. The strong trend in technology sector stocks imparted positive trend. While the near-term trend appears positive, the index is likely to test the 19000-19300 range after the upmove. A drop below 19000 would have negative implications.

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