The Hindu Business Line : Near-term outlook turns weak for Nifty

Preferred view: The week that passed by was a watershed as far as Nifty is concerned. The index moved past the psychological 3000-point mark during the week. It closed above it on Tuesday and could not hold on above this level on subsequent days. The trend turned bearish in the last three days.

The near-term outlook has turned bearish. It is, however, positive to notice that the index has managed to hang above the negative trigger level of 2925. There is a strong support at 2925-2940. The trend would be positive as long as this level is not taken out. A close below 2925 would result in a drop to 2875-2880.

We continue to favour the earlier view of a rally to 3100-3150. This view would warrant a reassessment on a close below 2870. Till such time, we would favour a positive outlook for the Nifty.

Comments: The bearish trend that prevailed across major global stock markets cast a negative impact on the domestic market sentiment. The upward revision of interest rates by a few financial institutions as well as the slowdown in FII inflows dampened market sentiment.

This did not, however, quite prevent quite a few mid-cap stocks from notching up sharp gains during the week. Gujarat Alkalies, Aurobindo Pharma, Sanghvi Movers, KEC International, Gammon India and Shoppers Stop were prominent among the gainers.

After a spell of corrective phase, sugar sector stocks were back in the business in the last couple of days. Most of the frontline sugar companies have recorded sharp rise in their share price. As observed in the earlier weeks, we still maintain that a significant correction may be on the cards. The market action in the next few weeks would provide crucial signs about the direction of the future price movement. Trading patterns over the next couple of weeks will have to be watched closely as they could provide a cue on whether the recent fall marks the start of the corrective phase or it is just a short-term decline to the earlier rally.

We now prefer the view that recent fall appears to be a short-term correction and not the start of a longer-term bearish phase.

SENSEX (9742)

The trend turned weak after the index moved to the target zone of 9950-10000 that was mentioned in earlier weeks. We continue to favour the view of a rally to 10100-10200. This view would be negated on a close below 9500. After a drop to 9620-9630, the Sensex is likely to move to the target zone.

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