We have an exciting week ahead of us. Indices are attempting to claw higher, but the rally has not progressed enough to reverse the short-term down trend.

The trading in Indian market in the early part of the week will be dominated by the RBI’s monetary policy meeting scheduled for Tuesday. Rajan’s action can either send stocks soaring or crashing, depending on whether rates are cut or status quo is maintained.

The HSBC services PMI numbers for March and fourth quarter earnings of companies will be the other numbers that will also keep investors diverted.

It was a valiant fight-back by the bulls in Indian market last week. Just as the Sensex and the Nifty appeared ready to breach their long-term 200-day moving averages to launch into medium-term correction, a flurry of buying helped the indices pull back from the brink to end almost 3 per cent higher.

With the first three months of the year behind us, India has not done too well compared to global indices. The best performing stock index in the March 2015 quarter is the Venezuelan index that has gained 41 per cent. Another South-American index, Argentina’s index, comes next with 25 per cent gain. The index that has everyone spell-bound over the past month is the Shanghai Composite Index, up 20 per cent in the first three months despite concerns on slowing Chinese economy.

The Sensex with 4 per cent gain is placed in the middle of the ranking table, above Dow (0.3 per cent gain) and Brazil’s Bovespa (-10 per cent).

The quarter was however dominated by the 20 per cent drop in crude to the low of $42. Fear of the negative impact of this slide on economies of crude exporters capped stock prices in these countries. Another highlight of the quarter was the strong 7 per cent rally in the dollar index that briefly tested the 100 mark in March. The movement of the dollar will have to be tracked closely in the coming months due to its effect on the appetite for riskier assets such as emerging market equity.

The US economy adding 126,000 non-farm payroll jobs in March, the slowest monthly increase since December, will be in focus as the global markets return to trading terminals after a long weekend.

There is a growing concern that the strong dollar is beginning to hurt exports as well as domestic growth in the US; this is impacting employment. This weak data will bring joy to the markets as it implies that the Fed may not go on an aggressive interest rate-hiking spree.

Sensex (28,260.1) The Sensex opened the week on a firm note and went on to close 801 points higher.

The week ahead: The Sensex has reversed from the 200-day moving average line positioned at 27,280. But it is not out of the woods yet. As mentioned in our last column, a bounce can take the index higher to 28,336, 28,820 or 29,000. We retain the view that the short-term view will turn positive only on a close above 29,000.

The index is currently pausing at the first resistance. If investors grow nervous on Monday and a sell-off occurs, the index can retreat to 27,248 26,776 or 26,469 over the coming week.

Short term view will turn positive only on a close above 29,000. The 50-day moving average positioned around this level will also act as an impediment.

Medium-term trend: There is no alteration in the medium-term view for the index. It could be on the verge of reversing lower. We need to watch the action over the next couple of weeks before determining the medium-term trajectory. It is best to stay on guard to watch out for a medium-term reversal as long as the index trades below 29,000.

Nifty (8,586.2) The Nifty too reversed smartly from the low recorded on Monday to close 245 points higher.

The week ahead: The Nifty is clawing up from a short-term support. These are the guide posts for this week,

Inability to move past 8,600 will mean that the index is readying for a decline to 8,269, 8,181 or 8,065 in the days ahead.

Move above 8,600 can take the Nifty up to 8,700 (where the 50-day moving average is positioned) and then to 8,800. Traders ought to stay cautious as long as the index trades below 8,800.

Short-term trend will turn positive on a move above 8,800. Next target will be 9,119.

Medium-term trend: The index has once again moved above the 8,400 level, mitigating the bearishness somewhat. But we need to watch the movement over the next couple of weeks before determining the medium-term trajectory of the index.

Global cues Global markets held on and closed with small gains in a short week. The CBOE volatility index fluctuated in a narrow band between 14 and 16, reflecting investor optimism.

The Dow held above the short-term support at 17,500 last week. This implies that the short-term view in the index continues to be positive. Reversal from these levels can take the index higher to 18,288 and then to 18,830 in the days ahead. Short-term view will be under threat only on a close below 17,500.

comment COMMENT NOW