The Hindu Business Line : Near-term outlook is positive for Nifty

Preferred view: The index moved as anticipated last week. The trend remained buoyant and then momentum picked up on the move past the crucial trigger level at 2840.

It was also positive to notice that the trend was strong enough to push the Nifty past the next resistance level of 2875.

The near-term outlook appears positive. The index appears to be progressing towards the long-term target zone of 2975-3000 mentioned earlier.

The positive view would be in force as long as the index trades above 2830. A close below this level would be an early sign of weakness, while a drop below 2800 would result in a prolonged corrective phase.

Comments: Though the index managed to record a gain of about 77 points for the week, much of the action was centred on mid-cap stocks.

Besides, banking companies, too, attracted market attention during the week.

Quite a few public sector banks and select private sector banks logged sharp gains over the past few days.

In the mid-cap space, buying interest was evident in sugar stocks such as Balrampur Chini, Dhampur Sugar and EID Parry.

After quite a while, the cement sector attracted investor attention, with stocks such as Prism Cement, Mysore Cement, Mangalam Cement and India Cements recording sharp gains.

Though the bullish sentiment is gradually percolating to the mid-cap and small-cap stocks, the recent rally is pushing the index deeper into the overbought zone. There is a case for a significant correction setting in anytime now. Though the weekly charts indicate some room on the upside, a rally to the target zone of 2975-3000 may push the index to an overbought zone in the weekly charts as well, which may set the stage for a significant correction.

Investors need to be alert to press the caution button when the need arises.

Periodical profit-booking and weeding out stocks in the speculative grade are essential for protection of capital as well as unrealised gains.

SENSEX (9640)

The index ruled firm as anticipated last week. The close above the bullish trigger level of 9500 is a positive sign and the Sensex appears on course to touch the target zone of 9950-10000.

The short-term positive outlook would be under threat on a close below 9300.

A close below 9080 would have negative implications and would push the index into a corrective mode.

With the dawn of the earnings season, the market perception of corporate performance would have a major influence on the short-term outlook.

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