The Hindu Business Line : Index Outlook

The battle for supremacy that ensued between the bulls and bears saw no clear winners emerging last week. Though the bears were aided by the Thai Government's flip-flop regulatory measures, the bulls managed to claw back and closed the week with a minor loss of 143 points in Sensex.

The coming week promises to continue along similar lines. The expiry of the December contracts in the derivatives segment will ensure that there would be plenty of volatility to pepper the proceedings in a week when the bigger players would be off holidaying.

The reduction in the put call-ratio in Nifty contracts is a trifle disquieting.

It indicates that the short positions are being covered up, as market players do not expect markets to fall further. Reduction in short positions is a negative, as we need the shorts to cushion the markets in the event of a fall or to spur the next leg of the up-move.

FIIs were net sellers in both cash as well as derivative segment in the beginning of last week. But their posture became more benign as the week advanced. All the sectoral indices have stabilised.

Sensex has short-term supports at 13206, where its 50-day EMA is positioned and a little lower at 13150, where the medium-term trend line is present. The short-term outlook for Sensex will stay positive as long as these support levels are not breached.

Fall below 13148 will take Sensex towards 12936. The intermediate term outlook for Sensex will stay positive as long as it stays above 12449. That is the support that investors need to watch out for.

We expect Sensex to oscillate in a broad range between 13800 and 12900 next week making life extremely difficult for traders. A rally beyond 13800 will propel Sensex to 14129.

Investors can stick to the fence till the intention of the market becomes more apparent.

Nifty (3871.1)

Nifty did not get past the 3950 mark that we had indicated and moved lower to an intra-week low of 3768.8. As Nifty is poised mid-way between the recent fall from 4047 to 3657, a sharp movement in either direction is possible from here.

The upper targets next week are 3938 and then 4047. Failure to rally above 3938 will be a cue for traders to play short with a stop at 3950.

The downward targets would then be 3750 and then 3690. The positive outlook for the intermediate term will continue till Nifty sustains above 3601.

Global Cues

Markets in the US came off last week on a report showing a dip in durable goods order. The DJIA closed 0.8 per cent lower while the Nasdaq lost 2.3 per cent for the week.

The weekly chart of Nasdaq is a cause of concern as we are getting early signals that the up trend that began in July 2006 could be complete.

Comex gold futures are reacting after hitting a recent high of $654. A fall below the current levels can see the prices moving lower towards $600.

Nymex light crude futures are stuck in the band between $61 and $64 in what looks like the second wave of an intermediate-term up move. An upward break out to $66 or $70 seems imminent in the short-term.

Copper futures on Comex have turned weak and could take support at $270 next.

(Note: The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. 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)

Lokeshwarri S. K.

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