The Hindu Business Line : Nifty breaches key support levels

Except for a recovery on Tuesday, the market sentiment remained subdued. The index dropped sharply on Friday and breached a host of key support levels in the process. The drop below the crucial negative trigger level of 1985 has effectively negated the earlier positive view.

As observed last week, the Nifty could now drop to the 1895-1900 range. Though there is a short-term support at 1920-1930 range, the recovery from this level would be corrective in nature and not represent the commencement of a new upward trend.

Comment: The stock market was not enthused by software major Infosys' performance and earnings guidance. Led by the Infosys, quite a few technology sector stocks took a pounding on Friday.

The fall on Friday resulted in the breach of the support levels of quite a few stocks. The index appears to be headed towards the support level at 1890-1900 range. There is a cluster of support points at this zone and the Nifty rebounded off at this range in January.

Holders of short positions may have a stop-loss at 2005. The resistance level for the index is placed at 1990-2000 zone. Fresh short positions may be considered if the index gets to the vicinity of this resistance zone. Stop-loss for fresh short positions may also be placed at 2005.

SENSEX (6248.3)

Preferred view: The Sensex dropped below the negative trigger level of 6320. This has not only negated the earlier positive outlook, but has also imparted bearishness. The immediate support is placed at 6125-6135 range. The index is likely to breach this level and drop to the 5875-5900 range. The negative view and the possibility of a drop to 5875-5900 range would be in force as long as the index trades below the 6650-mark.

Comments: With the onset of the earnings season, the financial performance of top companies would be a key driver of market sentiment. The short-term outlook for quite a few stocks has turned bearish. This confirms the negative outlook for the index.

CNX IT (2670.0)

The index ruled weak as anticipated last week. It dropped below the earlier mentioned target level of 2730-2750 range. The outlook remains bearish and a drop to 2540-2550 range appears likely. Holders of short position may have a stop-loss at 2770. Short positions may be considered afresh on short-term bounce with a stop loss at 2785.

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