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B. Krishnakumar

NIFTY (1553.2)

Preferred view: The movement in the index was in line with last week's expectations.

After a sharp drop on the Budget day, the index staged an equally sharp recovery on Friday. The market action last week has not helped in resolving the uncertainty associated with the short-term price movement.

The index remains stuck in a narrow trading band. Going by the prolonged sideways price movement, it appears that the ongoing move could be "Wave B" of some order in Elliott Wave parlance. The implication is that the index would see one more leg of a downward move taking it to the earlier low at 1292. This view would be negated only if the index closes above 1660.

Comment: After a huge build-up of expectations, the Budget turned out to be a dampener, if the market reaction on Thursday was any indication.

The announcement of the turnover tax on securities transactions affected market sentiment. Much of the drop on Thursday was recouped on Friday with the key indices staging a sharp recovery after a particularly weak opening.

The developments pertaining to the progress of the monsoon and the earnings growth recorded by the corporate sector for the June quarter would have an overriding influence on market movement; the Budget related euphoria would fade gradually.

Alternative view: The price movement last week has not lent any direction or momentum to the Nifty. There view expressed in earlier weeks remains valid. As observed in previous weeks, the medium-term trend is bearish and only a move past 1750 would impart positive momentum.

This would indicate that the decline that commenced at 2014 in January 2004 has been completed at the recent intermediate low of 1292. The momentum and the structure of the market movement would determine the long-term trend.

SENSEX (4945.48)

Preferred view: The movement in the index was in sync with last week's observations. As anticipated, the Sensex moved to the 5000 mark and turned weak thereafter. The index also breached the negative trigger level of 4780, but managed to close above it on Friday.

The recent price movement has not negated the views expressed in earlier weeks. The index is expected to continue the downward trend on the completion of the ongoing upward move. A drop below 4600 would confirm the weak outlook for the Sensex. This would also validate the view that the Sensex is headed towards the low formed at 4228. The index continues to be stuck in a relatively narrow trading zone. Only a strong breakout from this range would impart a meaningful trend in the market. In this contest, the price movement in the next few weeks would be critical in determining the long-term outlook for the market. A close below 4600 would suggest the onset of the bearish phase.

Alternative view: While the index is expected to test 4228 level, a move past 5500 would be an early sign of the reversal of the downward trend. As mentioned in earlier weeks, the expected weakness will not, however, negate the long-term positive outlook for the market.

S&P CNX 500 (1273.3)

Preferred view: The movement in the index was similar to that of other key indices such as Sensex and Nifty.

As anticipated last week, the index managed to move to the target zone of Rs 1291-Rs 1300. After recording a high of 1305, the index turned weak on Thursday.

The near-term trend appears weak and a drop to 1120-1150 range appears likely. Only a close above 1360 would negate the weak outlook.

CNX IT (2072.35)

Preferred view: As anticipated, the index turned weak after a short-term rise. The near-term trend appears weak and the index is likely to drop to 1965-1970 range.

Stop loss for long positions may be placed at 2010. A drop below 1965 would be a negative trigger.

(Note: The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. Opinion and price targets are based on the Elliott Wave Analysis. The stop-loss level provided with the recommendation is important. The original view would stand negated if the stop loss level is breached. There is a risk of loss in trading)

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