The floor appeared to have caved in for most equity markets in the initial part of last week. But Mario Draghi proved to be the knight in shining armour for the distressed financial markets, with his statement that the European Central Bank will consider further stimulus in its next meeting. Now, Janet Yellen and Bank of Japan Chairman, Haruhiko Kuroda, will come across as extremely insensitive if they do not follow Draghi’s lead in assuaging the battered market sentiments.

Both the Federal Reserve’s and the Bank of Japan’s (BOJ) monetary policy meeting are scheduled this week. Yellen is expected to postpone further rate hikes till financial markets stabilise and the BOJ could announce some stimulus to aid the Japanese economy. These will help markets claw a little higher.

The Indian stock market too sank in the first four sessions last week with the Sensex hitting the low of 23,839 before closing above the 24,000 level. The Nifty similarly fell to 7,241 before clambering above 7,400 on Friday. While the rally needs to continue for few more sessions to signal that a bottom is in place, it at least gives us some respite from this relentless bludgeoning from the bears.

The Indian market can turn quite volatile in the short week ahead. The F&O expiry on Thursday will cause a flurry of activity in the early part of the week. Open interest in NSE derivative segment is around ₹250,000 crore, indicating the possibility of sharp moves as traders roll over their positions. Put-call ratio has declined to 0.8 indicating an over-sold market.

Nifty 50 (7,422.4)

It was with a sinking feeling that we watched the Nifty fall below 7,400 last Wednesday. But it has recovered to end the week above 7,400, signalling that all is not yet lost.

The week ahead: The Nifty reversed from the intra-week low of 7,241 last week. If the slide resumes next week, the index can halt in the 7,187-7,250 zone. Breach of this level can take the index to 7,057.

Resistances for the week will be at 7,524 and 7,700. Inability to move above the first hurdle will mean further slide. Close above 7,700 is needed to make the short-term view positive.

Medium term: The close above 7,400 last week is a positive for the Nifty. As explained earlier, the target of the third wave down from the 9,119- peak has the targets of 7,359 and then 6,756. Fibonacci retracement of the up-move from the December 2011-low gives us an important support at 7,374.

Both these levels were tested last week. We need to see if these supports hold for another couple of weeks. If they do, then it can be assumed that a significant support is in place.

Sensex (24,435.6)

The Sensex too moved below the critical medium-term support at 24,000 before managing to close higher last week.

The week ahead: The supports at 23,833 and 23,446 will continue to cushion any fall in the index in the coming sessions.

The level between 24,200 and 24,500, however, continues to be very critical and there is a possibility of a significant bottom formation here.

This is because the 38.2 per cent Fibonacci retracement level of the up-move from the December 2011-low occurs here. A rebound from these levels will re-confirm the view that this is a correction in a long-term bull market.

A more important support for the Sensex occurs further lower at 22,427 and 21,000. The structural uptrend will be threatened only on a strong close below 21,000. It may be recalled that both the 2008 and 2010 peaks were formed at this level. The index has to move below it to signal a long-term trend reversal.

Bank Nifty (15,497.5)

The Bank Nifty hit the low of 14,755 before staging a recovery last week. Immediate resistances are at 15,908 and 16,154.

The short-term trend will turn positive on a close above 16,154. Therefore traders should close their short positions above this level.

Supports for the index are at 14,754 and 14,338.

Global cues

Most global benchmarks pulled higher in the final session, forming a long lower shadow in the weekly candle. The CBOE VIX hit the high of 32 before ending the week at 22.3; much below the previous week’s close.

The Dow hit the low of 15,450 on Wednesday. But the recovery on Thursday and Friday helped the index erase the losses and close the week 105 points higher.

For the index, 15,370 is an important long-term trend decider. Close below this level will mean the onset of a structural down trend.

There is a long hammer in the weekly chart. We need to see the formation next week to determine if this is a sustainable rebound.

The Shanghai Composite is also halting at the 2,900 level, where the index paused last August. If the Chinese government too watches technical charts, it will do all it can to support the index at this level.

Crude oil had investors spell-bound by first plunging to $27.5 (Nymex light crude futures) and then staging a spectacular recovery by surging to $32.19 on Friday.

However, the commodity has to move at least above $37 to signal a sustainable rebound.

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