The Hindu Business Line : Index Outlook

Markets went into a gentle slide last week. The dearth of positive news flow prevented Sensex from pulling itself higher. Most of the market participants would be glad to see the month of May pass in this mild fashion. Traders, however, had a torrid week due to the intra-day twists and turns.

Volumes were robust though the market breadth was indifferent. FIIs turned net sellers in the cash segment. The derivative segment continued to buzz with activity, the open interest on NSE is nearing Rs 52,000 crore again. Nifty put-call ratio of over one provides some solace. The sectoral indices are poised above crucial short-term supports.

An intense fight is raging between bulls and bears for the citadel at 13600. This has become a critical determinant for the short-term trend in Sensex. The 10-day ROC slipping in to the negative zone and the sequence of lower peaks and troughs since the 14383-peak is not conducive for the short-term outlook. However, wait for a firm close below 13600 before anticipating a fall to 13500 and 13206.

The medium term outlook remains positive. As we have been reiterating, this view will be dented only on a close below 13173. Investors with a longer-term perspective can stay sanguine as long as the 200-day moving average at 12953 is not breached.

It is the intermediate term trend that makes an overdose of vigilance necessary. If the upward move from 12425 is the B wave of the correction that commenced from the February high of 14723, the C-wave down has the minimum target of 12962. A strong move beyond the previous all-time high is required to allay this cautious view.

Volatility is expected to rule over the near term. Sensex can move higher towards 14088 next week. A reversal below this level would take Sensex lower to 13600 and then 13306. A firm close above 14383 should be the cue to traders that they can trade long again. Investors can utilise dips to buy from a long-term standpoint.

Nifty (4076.6)

The bullish hammer formed in the daily candlestick chart of Nifty indicates that the index can try to move higher towards 4111 and 4127 next week. Inability to rally above 4127 would denote that the short-term down move from 4217 would unfold its third leg that will take Nifty lower to 3948 and then 3887.

A move past 4127 will take Nifty to the medium term high of 4217. Traders should go long only if the index moves past 4217. It would then have the targets of 4245 and then 4351.

The positive outlook for the medium term will turn negative if Nifty falls below 3846.

The support below this level would be provided by the 200-day moving average positioned at 3756.

Global Cues

Volatility was the theme running through the global equity markets last week. Nervousness induced profit booking at higher levels was used as an opportunity to buy by investors who had missed the April rally. DJIA closed half per cent higher while NASDAQ closed half per cent lower. Other European and Asian markets took one step backwards last week. But no inference can be drawn from the move.

Nymex crude is precariously positioned at the support of $61. The price movement last week suggests an impending move towards the next target of $57. Precious and base metals also had a tough week.

Lokeshwarri S. K.

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