The Hindu Business Line : Index Outlook

The first act of the earnings season has the market's approval as the IT and cement companies have jointly staged a satisfying show. The second act is going to be an interesting one with Dr Y. V. Reddy making a special appearance. Since the RBI governor has the penchant for shocking the audience, it will be up to the Ambani senior and rest of India Inc to salvage the performance after his exit.

Strong inflows from the FIIs has been one of the principal drivers in the last two weeks. Net FII investment in cash segment is nearing the $1 billion for the month of April. Short covering in the derivatives segment has been the other factor that cushioned our markets. Volumes too saw a pick-up in both the cash as well as the derivatives segment.

We have been re-iterating that the medium-term outlook in Sensex would turn positive only on a close above 13821. Sensex accomplished this feat last week. The medium-term outlook has now turned positive since Sensex has also closed firmly above its 50-day moving average.

But, as per the flat pattern that is being traced from the low at 12316, a rally up to 13903 was on the cards (as mentioned in last week's column). If the upward move continues for a week more, it would call for revision of counts. As per revised counts, Sensex would have the targets of 13822 and then 14687. In other words, volatility is expected to persist even as Sensex moves higher and investors should be prepared to face sudden reversal of the up trend.

Trading would of course be nightmarish in such a market. Investors can utilise weakness to buy with a long-term perspective. For the week ahead, Sensex could move sideways between 13300 and 14250. The upper targets for the week are 14155 and then 14245. Supports would be available at 13468 and then at 13345.

Nifty (4083.5)

Nifty got past the short-term resistance at 3950 last Monday and went on to an intra-week high of 4090, past our outer target of 4070.

The medium-term outlook in Nifty has turned positive since it is above the 4000 mark.

A revision of the medium-term counts in Nifty gives it the targets of 3962, 4202 and then 4479. Since the index is past the first target, it might attempt to go to the next medium term target now.

For the short term, the upward targets are 4090, 4160 and then 4194. The supports for the week are at 3948 and then 3909. Traders can play long till Nifty stays above 3900.

Global Cues

Global markets saw a return of volatility last week. Though Dow Jones Industrial Average closed at a new all-time high and the NASDAQ Composite Index, and the S&P 500 made new six-year highs, many Asian and European markets seem to have launched into a short-term down trend after the upheaval caused by China's searing GDP growth on Thursday.

Comex gold is nearing the psychologically important $700 mark. A reversal from this level will cause the gold prices to remain in the medium-term range between $500 and $600 for a few more months. The chart pattern so far suggests that gold is likely to move in a broad trading range for some more time.

Nymex light crude continuous is registering lower peaks and troughs, which is far from comforting. It has also moved below the long-term 200-day moving average.

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