The Hindu Business Line : Nifty delicately poised

The Nifty moved within the striking distance of the target of 2590-2600 that has been indicated in this column for several months now, and turned turtle subsequently.

As the index managed to hold above the crucial support level at 2450, there is a case for a rally towards the short-term resistance level of the 2530-2540 range.

A close below the 2450-level would result in a drop to the 2390-2400 level and a drop below 2390 would pave the way for the test of the 2300-mark.

On the upside, a close above 2570 would be the basic requirement for the resumption of the long-term bullish trend.

As observed last week, a weekly close below 2300 would be a conclusive sign of reversal of the bullish trend.

This would also mark the start of a relatively prolonged corrective phase. Stop-loss for a portion of the long positions may be placed at 2450 and at 2300 for the balance.

Viewed from a longer-term perspective, a close below 2300 would only delay the start of the next leg of the long-term uptrend.

It would not negate the long-term positive outlook or the possibility of a rally to the 3000 mark for the Nifty.

Comments: The much-awaited technical correction appears to have dawned upon the market. We do, however, continue to be bullish on the Indian markets from a long-term perspective.

The long-term uptrend is likely to reassert itself on the completion of a short-term correction.

The price pattern traced out by index heavyweights such as Reliance, Infosys, Hindustan Lever, HDFC, SBI and ITC tend to support the long- term positive view. Most of these stocks appear to have an upside potential of at least 25 per cent from prevailing levels.

SENSEX (8222.6)

Preferred view: The index moved to the target zone of the 8500-8550 range and turned bearish subsequently.

As observed last week, the reversal in trend was as sharp as the earlier rally. The trend would remain bullish as long as the index holds above 8050. A drop below this level would push the index to the 7850-7900 range.

The long-term trend remains bullish and the Sensex appears to be well on its way to move into five-figure territory. Investors may capitalise on weakness in the short-term weakness and accumulate stocks of fundamentally sound companies.

CNX IT (3153.2)

The index moved in line with expectations and also moved to the target zone of the 3330-3340 range.

The trend turned weak subsequently and the index dropped below the crucial bearish trigger level of 3200. A test of the immediate support level at the 3050-3075 range appears likely. Only a close above 3290 would re-instate positive trend. Till such time, the index would move in a sideways fashion or seek lower levels.

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