The Hindu Business Line : Index Outlook

Sensex started the week on an upbeat note with a 283-point rally, but it lost its way thereafter. All efforts to drum up an enthusiastic response to the forthcoming interim budget proved fruitless and the Sensex trudged along in an apathetic mood. This unresponsive attitude is probably good since there will then be lesser room for disappointment. FII activity was also muted. Volumes were nothing to write home about, in cash as well as the derivative segment. However, open interest moved higher past Rs 50,000 crore pointing towards revival in trading interest. High put call ratio points towards a circumspect stance being adopted by traders.

Sensex moved higher past the first target indicated last week to peak at 9725 on Tuesday. But it has been moving in a very tight range between 9300 and 9700 since then. This narrow move keeps the short-term up trend from the January 23 trough alive. Immediate resistance for the Sensex is around 9800. If this level is crossed there can be a foray in to the resistance band between 10,000 and 10,200.

The weekly Sensex close above the 50-day moving average is a positive. However, trend following indicators such as the oscillators are signalling that the index is losing momentum. The weekly momentum indicators are moving in neutral region, struggling to move in to the bullish zone. The implication is that investors need to stay watchful in the way ahead. These plodding moves of the Sensex have kept the wave counts unaltered. Sensex is forming a triangle since the last week of October and the E wave of this formation appears to be unfolding from January 23. According to this count, the current up-move faces hurdles at 9800 and then at the upper boundary of the triangle at 10,108. A close below 9000 will signal the end of this formation.

It is hard to envisage a blitzkrieg next week, given the tight range that the index is moving in currently. A rally past 9800 will take Sensex to 9976 or 10,240. Supports for the week would be at 9310 and then 9050. Short-term traders should desist from making fresh purchases on a decline below the second support.

Nifty (2948.3)

Nifty recorded a peak at 2957 on Tuesday and then moved sideways in a narrow band. Key resistances for the short- term are at 2970 and then at 3030. The current up-trend could extend a little further but a cluster of resistances just ahead makes a sudden reversal quite likely in the week ahead. Breakout above 3030 will take Nifty to 3110. Conversely, inability to move past 3000 will signal impending weakness and a decline to 2870 and 2790. The medium- term outlook for the Nifty remains sideways between 2200 and 3200. Investors should desist from making fresh purchases as the index nears the upper boundary of this trading range. Key medium-term support is 2760.

Global Cues

Global markets could not make any progress last week. Disappointment over the vague contours of the bank rescue package and grim economic numbers from Europe kept the lid on equity prices.

European markets were the worst affected and the DJ Euro STOXX 50 index declined 5 per cent for the week. One disconcerting point about last week’s trade is the decline of Dow Jones Industrial Average below 8000. The index has closed blow this level for four consecutive sessions and a fall to the November trough at 7450 seems inevitable now.

Close above 8450 is required to mitigate the negative short-term view.

One of the strongest performers last week was Russia’s RTSI Index that rose almost 20 per cent.

Shanghai Composite was the other dazzler with 7 per cent rise.

Interest appears to be re-emerging in the brow-beaten parts of the BRIC four-some. — Lokeshwarri S. K.

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