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B. Krishnakumar

NIFTY (1633.4)

Preferred view: The movement this week was no different from the trend witnessed in earlier weeks. The index is still struggling to stage any meaningful move in either direction. This, however, did not prevent the index from moving to the target zone of 1660-1670 that was mentioned last week.

After hitting a high of 1659, the Nifty turned weak on Friday. Though the index could test the key resistance zone at the 1675-1680 range, the scope for any significant upside appears limited. As observed in earlier weeks, the index is likely to test at least the 1450-1475 range. Only a move past 1725 would negate this view and would indicate that the index is in the next leg of an upward move.

The waning momentum behind the successive upward swings supports the negative outlook. This indicates that the recent recovery from the low recorded in May is more of a corrective rally rather than the start of a new upward trend.

The 14-day RSI is yet to break past the crucial resistance zone at 60-70. This, again, is a pointer of a short-term bearish phase. The price movement over the next few weeks is likely to throw a clue about the near-term market direction.

Comment: The conflicting nature of news flow impacted market movement. Concerns pertaining to rising inflation and the spurt in crude oil price dampened market sentiment; signs of the revival in monsoon and heavy rainfall in western part of the country were positive developments.

On Friday, the index completed a "reversal bar" pattern. It remains to be seen if this pattern signals the start of a new leg of downward move. A drop below 1610 would be an early indicator of the onset of a significant downward trend.

Alternative view: Though the index managed to break the upper boundary of the trading range the week before, the crucial follow-up buying action was not to be seen last week. As observed in earlier weeks, the entire recovery from the low recorded in mid-May appears more of a relief rally. 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.

SENSEX (5197)

Preferred view: The index was confined to a narrow trading range last week. The firm trend in old-economy stocks such as Reliance, ONGC, Tata Steel, Sail and Tata Engineering played a key role in shoring up the index. Reflective of the lacklustre trading action, the Sensex logged a net gain of about 20 points for the week.

As anticipated last week, the index met with resistance at the 5260-5300 range. The near-term trend appears weak and a drop to the 4700-4750 range appears likely. A break of 5030 would strengthen the case for a drop to this range.

Alternative view: While the index is expected to test the 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 (1360)

Preferred view: The index mirrored a trend that was similar to the Sensex and Nifty. After a sharp rally on Thursday, it turned weak on Friday. The near-term trend appears weak and a drop to 1300-1310 range appears likely. A break below 1345 would be the first negative trigger.

CNX IT (2264.5)

Preferred view: The index faces a strong resistance at the 2340-2350 range. Though there is a possibility of an upward move to this zone, it is unlikely that the index would manage to break this resistance zone. A move above 2310 could help the index progress closer to the resistance zone; a drop below 2225 would mark the start of a short-term downtrend.

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