The Hindu Business Line : Index Outlook

If the Union Budget can strive to be a `non-event', so can the RBI's Annual Policy Statement. The markets, however, had no complaints with this innocuous document and Sensex jubilantly soared up to cross the 14000 mark. A touch of vertigo on Friday made Sensex close the week on a flat note.

Expiry of the April futures has been dealt with efficiently. Volumes were brisk, especially in the derivatives segment. The mid cap and small cap stocks gave a subdued performance. The charts of BSE Healthcare Index, Metals Index and Bankex are indicating the commencement of a short term down trend on Friday.

Sensex recorded an intra week high of 14384 last week. This calls for a re-look at the medium term count. The overwhelmingly bearish overtone has clearly dissipated over the last two weeks. But the up-trend from the low of 12425 can still be part of the correction that began from February. Instead of being a swift and deep cut, the correction can make Sensex oscillate in a broad range between 11000 and 15500 over this year.

Momentum oscillators present a mixed picture. The oscillators in the daily chart are signalling a sell. The weekly indicators are entering into the buy mode whereas the sell signal generated in February 2007 has not yet reversed in the monthly chart. That sums up the current situation perfectly.

There can be weakness in the short-term. The extent of the fall would determine if the medium term rally from 12425 would have another leg or whether it has already terminated at 14384.

The abbreviated week ahead could see the market moving sideways with a negative bias. Sensex is expected to move lower to 13790 and then 13635. Traders can hold their long positions till Sensex stays above 13635. A move below 13635 can take the index to 13292. Resistance would be encountered at the recent peak of 14383. Move beyond this level will take Sensex to 14478.

Nifty (4083.5)

The Doji with a long upper shadow in the weekly candlestick chart and the giant bearish engulfing candle forming an evening star in the daily chart of the Nifty indicate a potent trend reversal at last week's high of 4217.9.

The index can move lower to 4041 and then 3988. Short-term traders can look for a buying opportunity around 4000.

However, no fresh longs should be initiated if the index moves below 3988 as it would then head towards 3850. Resistance for the week would be at 4217 and then at 4358.

Global Cues

Markets in the US continued their strong run, with the DJIA and NASDAQ closing with a gain of over 1 per cent for the week. The other global markets were more sedate and mostly moved sideways at the higher levels.

Crude moved above $66 towards the weekend on terror alerts in Saudi Arabia. The commodity appears set to consolidate in the $62 to $67 band for a few weeks before moving higher.

The positive medium term outlook will continue until the price stays above $60.

Movement in gold mimicked that in equities, consolidating at higher levels.

The trend remains positive and a move beyond $700 can take place soon. Similar trend was observed in copper prices too.

Lokeshwarri S. K.

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