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B. Krishnakumar

NIFTY (2154)

Preferred view: The index moved in line with expectations.

As anticipated last week, the index moved to the target zone of 2185-2200 and entered into a corrective phase subsequently.

After hitting a high of 2183.45, the index turned weak on Wednesday. The reversal of the index at a crucial resistance level is a sign of weakness.

The near-term outlook remains bearish and a drop to 2110-level is not ruled out. A decline below 2140 would indicate that the index is headed towards the next major support level at 2110.

There is an intermediate support at the 2125-2127 range; The Nifty could respect this support zone or slide to the 2110-level.

Short positions may be considered on intermittent price rally, with a stop-loss at 2190. A close above 2190 would help the index move to the next target zone of 2255-2275 range.

Holders of short positions may place the stop-loss at 2180. In the longer timeframe, the view of a rally to target zone of 2250-2300 is still valid.

Comments: After a firm trend on the first two days of the week, the sentiment turned bearish on Wednesday. Lacklustre trading marked market action during the next couple of days. The subdued trend in Reliance Industries, Hindustan Lever and the technology sector heavyweights affected the market sentiment.

The Nifty would have registered a sharp decline during the week, but for the relatively firm trend in ONGC, Tata Steel and banking sector stocks. The upward spike in the price of crude oil in the international market affected market sentiment. This, however, helped the ONGC stock seek higher levels. Though market sentiment remained listless, quite a few mid-cap stocks managed to log sharp gains during the week. The list of such stocks includes Aban Lloyd, Gammon India, McDowell and Titan Industries.

Alternate view: Though the earlier view of a rally to 2250-2300 range is the preferred view, the index could see a deeper correction if it declines below 2110.

A breach of this level could push the index to lower levels of 2035-2050 band. The movement over the next few days would provide clues about the magnitude and duration of the anticipated short-term weakness.

SENSEX (6853.73)

As anticipated, the index turned weak after a short-term rally. Though the Sensex had fallen shy of the target zone of 7000, it reversed direction after touching a high of 6954. The near-term outlook remains weak and a drop to 6640-6650 range appears likely.

CNX IT INDEX (2945.85)

The 3000-3020 range acted as a strong resistance for the index. As mentioned last week, the index reversed direction after getting closer to this zone.

The immediate support for the index is at 2900-2910 range. A breach of this level would have bearish implications. Hold with a stop-loss at 2910.

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