The Hindu Business Line : Index Outlook

Though corporate India panted and puffed to keep up with searing pace of growth in earnings, the response from the markets was a bored shrug. Sensex recorded a weekly gain of 0.9 per cent. It is becoming increasingly difficult to give a positive surprise to the markets, spoilt as they are, by the rich fare whipped out by way of corporate earnings over the last one year.

The coming week is a short four-day one with the F&O expiry thrown in to spice up the proceedings. There will, of course, be no respite from quarterly results, which will keep pounding in. With the open interest swelling beyond Rs 62,000 crore, wild gyrations are a given. But we can take heart from the fact that Nifty put call ratio is at the upper band at 1.71. The inference: scepticism is ruling high, short covering can push markets higher.

The notable event last week was the BSE Midcap Index hitting an all time high. A fall below 5852 is required to reverse the medium term up trend in this index. The BSE Small cap Index wasn't too far behind, gaining 2.5 per cent. It is just 4 per cent below its previous all time high. But it wouldn't do to get carried away with the mid-cap and small cap stocks now as both the indices are overbought and are showing negative divergences on the oscillator front.

Sensex moved in a narrow band last week just below the 14200 ceiling. Classic trend following techniques would consider this a consolidation before the next move upward. But under e-wave analysis, this can be labelled as the terminal corrective of the move that started from the low of 12800. We will wait for a firm close above 14200 to resolve this glitch.

We expect some choppy action next week. A move down to 13800 can be on the cards. Traders should not initiate any fresh long positions if the Sensex falls below 13800, as it could then head towards 13680 or 13560. However, the broader trend will continue to be up as long as Sensex sustains above 13560. On the higher side, Sensex can rise to 14279 but a firm close above this level is required to take Sensex to the next target of 14409.

Nifty (4090.1)

Nifty made a false move past the resistance at 4108 only to reverse from an intra week high of 4137. This index can try to rally to 4121 or 4160 early next week. Inability to rally past 4120 would be a sign of weakness. It would mean that Nifty is readying for a fall to 4020 or 3949. Bulls can watch for buying opportunity around 4020. Bears can go short if Nifty falls below 4020.

It is expected to be a difficult week to trade. The best recourse would be to stay on the sidelines till the market's intentions become clearer.

Global Cues

Earnings season was on in full swing in Wall Street eclipsing the crude's plunge to a 20-month low. Nasdaq fell 2 per cent last week, casting a cloud on technology shares worldwide.

Among the global markets that were the major gainers last week, the list included KLSE, Chile IPSA, PSE Composite Index, Sri Lanka All Share Index, Karachi 100 and Turkey ISE. Just goes to show that global investors are moving on to riskier pastures in search of those spectacular returns.

Crude continued to plumb new depths. What is worrying is that the down move from $78.4 is assuming an impulse wave character. The third wave down has the targets of $49.5 and then $40.1.

Lokeshwarri S. K.

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