The Hindu Business Line : Index Outlook

We maintain a move towards 3720-3730 as our preferred view. In the short-term, the index could see some bearish pressure and a test of 3340-3350 appears likely. This, however, would not invalidate the long-term positive outlook. It would take a close below 3290 to negate the long-term bullish view.

Comment

The market sentiment took a knock on Tuesday consequent to the hike in the margins applicable to the trades executed in derivatives market segment. This resulted in a crash of about 86 points.

The index staged an equally dramatic recovery on Wednesday.

The clampdown by SEBI on the entities involved in the IPO scam imparted weakness on Thursday.

The index once again managed to display resilience by staging a sharp recovery on Friday after having dropped by over 100 points during the early part of the day.

Taking into account these developments, it is positive to notice that the index has managed to get away with a marginal decline of about 16 points for the week.

Index heavyweight Reliance Industries played a key role in keeping the index at bay. The announcement of improved quarterly performance by Reliance lent stability to the index.

Sensex (12052.92)

The long-term outlook for Sensex remains positive. The index enjoys a strong support at 10800-10900.

The outlook would be bullish as long as the index holds above this level.

The weekly and monthly charts of the index suggest a rally towards 13500-14000. Investors willing to play the waiting game may use price weakness to pick up exposure in fundamentally sound stocks.

CNX IT (4341.85)

Though the anticipated short-term weakness materialised during the week, the extent of fall was more than what we had anticipated.

The index touched a low of 4054 and closed at 4313 on Friday.

The weak trend in Infosys and other technology heavyweights imparted a bearish trend in the index.

The index has managed to find support at a crucial level at 4030-4040.

The outlook would remain bullish as long as the index holds above this level.

The index appears on course to move to the target zone of 4650-4660. The long-term positive outlook would be under threat only on a close below 3920.

(Note: The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. Opinion and price targets are based on the Elliott Wave Analysis. The stop-loss level provided with the recommendation is important. The original view would stand negated if the stop-loss level is breached. There is a risk of loss in trading)

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