The Hindu Business Line : Positive outlook for Nifty

Preferred View: The market action was in line with expectations. The Nifty ruled weak initially and staged a recovery right at the support zone of 2790-2800 that was mentioned last week. After hitting a low of 2783, the trend turned positive on Wednesday.

A positive trend thereafter resulted in the index closing above the 2900 mark on Friday.

As mentioned last week, we continue to favour a move towards 2975-3000 as our preferred view. The recent price pattern has panned out as anticipated and has also lent credence to the positive outlook.

The index, however, has one last hurdle to be cleared before the target zone is reached.

A close above the upward sloping trend line channel at 2920 would be the final confirmation of the rally to 2975-3000. This view would be negated only on a close below 2720.

Comments: It was quite an eventful and volatile week. The scheme of demerger of index heavyweight Reliance Industries took effect during the week. The stock has settled above the Rs 700 mark after giving effect to the demerger. The sharp recovery in the indices over the past couple of days, despite the spurt in crude oil price, took quite a few participants by surprise.

Stocks from the sugar sector were the star performers during the week.

Irrespective of the production capacity or underlying fundamentals, sugar stocks across the board attracted market interest during the week.

Sharp gainers included Dhampur Sugar, Sakthi Sugar, EID Parry, Kothari Sugar, Ponni Sugar Erode, Balrampur Chini and Bajaj Hindusthan.

As observed in earlier weeks, a significant correction may be just around the corner.

The recent recovery from the low of 2783 may well be the start of the final leg of the present phase of the upward move. We are looking forward to a sharp correction setting in more sooner than later.

Sensex (9521)

The movement in the Sensex was no different from that of the Nifty. The trend turned positive on the completion of the expected short-term correction. The index did not drop to the target zone; it managed to reverse direction at 9158, as opposed to the expected fall to 9000-9020.

The short-term outlook is positive and a move to 9950-10000 appears underway.

This view would be in force as long as the index holds above 9000.

Investors, however, need to get cautious as and when the index approaches our target zone as a corrective phase may be just round the corner.

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