The Hindu Business Line : Index Outlook

It was a historic week for the Indian bourses. Three of the leading indices, S&P CNX Nifty, BSE 500 index and BSE 200 index scaled record highs. The customary bout of profit booking associated with new highs, prevented Sensex from emulating its peers.

All eyes will be riveted on the derivative segment as the long-drawn May series expires next week. The burgeoning open interest, especially in the stock futures could cause turbulence. But short positions in the Nifty are expected to cushion the market's fall. FII activity in the cash segment denotes the improved disposition of global investors towards Indian equities in the last ten days.

Friday's recovery caused Sensex to close almost unchanged for the week resulting in a doji in the weekly candlestick chart. This pattern implies indecision. Momentum indicators in the weekly chart continue to be gung-ho though tentative sell signals are visible in the daily chart. The inference is that though volatility can be experienced in the short-term, the medium-term trend is not under threat yet.

The slide experienced last week has not dented the positive outlook for the medium term. A consolidation between 13900 and 14600 for a couple of weeks would be conducive for the continuation of the rally that commenced at 12425. However, a fall below 13800 should alert investors that the markets could be launching in to a more serious correction.

Sensex can attempt to move higher to 14500 and then 14631 next week. Selling pressure is expected to cap rallies in the forthcoming week. Supports for the week ahead would be at 13915, 13707 and then 13554. Traders can continue to play long until Sensex stays above 13900.

Nifty (4248.1)

Nifty has done it! It has recorded a new all-time high ahead of its rival, Sensex. Friday's rally can extend in to the early part of the week to take Nifty higher to 4291 and then 4332. If the index manages to surpass 4332, there can be a vertical rise thereafter to 4451.

But a runaway rally is highly improbable given the pressures of the F&O expiry next week. We expect Nifty to trade in the range between 4100 and 4330. Supports for the week would be at 4099 and then 4088.

The medium-term outlook stays positive as long as it remains above 4088. Traders can be sanguine till the index trades above Rs 4,100.

Global Cues

Alan Greenspan's warning regarding the bubble in Chinese stock markets has set off a short-term down trend in global equity markets.

Though the fall has not been severe enough to cause creases on the foreheads of the trading fraternity, some Asian markets, including Japan, Taiwan, Thailand and Hong Kong did receive a battering in the second half of the week.

The least affected by Greenspan-speak was the Chinese stock market. The Shanghai Composite Index gained over 3 per cent, yet again.

Precious metals as well as base metals weakened last week. Comex gold spot prices are precariously poised near the $655 support. A move to $634 looks imminent for gold.

The resistance at $66 is arresting the Nymex crude prices again. The commodity is stuck in a range between $61 and $67. Indication about the commodity's intermediate term trend will be obtained only on a breakout from either side of this range.

Lokeshwarri S. K.

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