The Hindu Business Line : Index Outlook

The market action was in line with expectations. A positive trend prevailed during the week and the index also managed to close above the resistance level of 3230. This has lent weightage to the view of a rally to 3450-3500 in the long term.

The index could get into a corrective phase shortly. There is a strong resistance at 3250-3260. The index is likely to test this range and get into a corrective phase shortly.

The long-term trend, however, remains positive and such short-term dips may be used to take exposures in fundamentally sound stocks.

As observed in earlier weeks, the long-term positive outlook would be in force as long as the index holds above the bearish trigger level at 3030. A weekly close below 3030 would be an early sign of weakness.

Comments

Though the index logged a weekly gain of about 50 points, the price movement was devoid of momentum. The strong positive momentum witnessed the week before was not to be seen during the week gone by. Quite a few stocks that recorded sharp gains earlier went into a sideways corrective mode during the week.

Stocks such as ABB, ACC, Siemens, Tata Steel, IVRCL Infrastructure and Tata Motors fit into this category. The sharp rally witnessed in quite a few index stocks lends credence to the expectation of a short-term corrective phase.

A close below 3220 would confirm the onset of a corrective phase; a close above 3260 would impart positive momentum.

Sensex (10860)

The index appears on course to move to the next target zone at 11500-11700. A short-term corrective phase is, however, likely to materialise before the Sensex embarks on the next uptrend towards this target zone.

The occurrence of "spinning tops" pattern in the Japanese Candlestick chart is an indication of uncertainty and weakness.

A close below 10760 would be an early indicator of a short-term correction; a close above 10960 would impart strength.

CNX IT (4144)

The anticipated uptrend materialised during the week and the index moved to the target zone at 4175-4200. The short-term outlook remains positive and the index could move to the next target zone at 4300-4310. The positive outlook would be negated on a close below 4000. Stop-loss for long positions may be placed at 4000.

CNX 500 (2790)

The index ruled firm in line with last week's expectations. The recent price action confirms the possibility of a rally to the target zone at 2850-2875.

The price movement in the past few days is, however, suggestive of a short-term corrective phase. A close below 2760 would confirm the short-term bearish phase; a close above 2810 would impart bullish momentum.

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