Market did a volte-face last week, with the Sensex and the Nifty reversing down from Monday’s high to record steep losses. Both the benchmarks are now close to the lows formed in May, at 26,400 in the Sensex and 8,000 in the Nifty.

We now need to watch if these levels are able to cushion the current fall. If these levels are broken strongly, the Sensex can head towards its next medium-term target at 25,500 and the Nifty to 7,500.

The sentiment has turned pretty adverse currently with the monsoon’s performance quite uncertain. But the bigger worry currently is the simmering issue in Greece.

If Greece defaults, it will lead to a virtual halt in international lending akin to that seen in 2008. Many lending institutions are holding Greek bonds which will have to be written off, eroding the capital of these banks. The rub-off on other weak European nations is too horrific to envisage. It is hoped that such an event will be staved off once again.

The Reserve Bank of India did bow to the wishes of corporate India and the government by cutting repo rate by 25 basis points. But it was done in a grouchy manner, like a child being forced to do something he does not wish to.

The message from the Governor was, “alright, you got it this time, but don’t expect me to continue to be this generous.”

It’s time the RBI took some lessons from the US Federal Reserve in delivering its monetary policy in a more gracious manner. The fear that there could be no further hikes added to the downward pressure on stock prices.

Foreign portfolio investors however appear quite sanguine. While they have been net sellers in some sessions, on the whole, they have purchased stocks worth $259 million in June. Net purchases in equity market for the year so far is around $7 billion.

With a data heavy week coming up, investors will turn their attention to macros. The industrial production numbers and the CPI numbers will be closely scrutinised by investors. The monsoon, rupee and Greece will also be of interest.

Nifty (8,114.7) The Nifty recorded the intra week high at 8,467 on Monday before ending the week 318 points lower.

We have an evening star pattern in the weekly chart that is not too comforting. But the candle that follows also needs to be bearish to conform.

The week ahead: The Nifty formed the low at 8,056 and is attempting to stabilise there. We have a support at 7,997 and then at 7,961. The entire area around 8,000 is an important psychological support that is of critical importance.

If the bulls are able to protect this level, the index could spend the rest of this year in the zone between 8,000 and 9,000.

But breach of 7,961 will mean that the downtrend from the 9,119 peak has resumed. The targets for this count are given below.

Resistances for the week are at 8,226 and 8,331.

Medium-term trend: We had outlined the possible medium-term counts last week. This has been confirmed by the movement last week.

A three-wave corrective move (A wave) has been completed at the low formed on May 7. The second leg of this move or the B wave has ended at 8,489, close to the 8,500 target given last week.

If we extrapolated the downward target of the C wave, we get 7,795 and then 7,367.

This coincides with the support around 8,000 and the next Fibonacci retracement support around 7,500.

In other words, let us hope the slide halts around 8,000. If it doesn’t, a decline of another 500 points would be possible.

Sensex (26,768.5) The Sensex too has plunged over 1,059 points last week. The deterioration in the momentum indicators in the weekly and monthly charts is a cause for worry.

The monthly oscillators are giving a sell signal for the first time since early 2014.

The week ahead: The Sensex will get immediate support at 26,423, the support formed on May 7. If the index reverses from here, it can attempt to move to 28,000 once again.

But bedlam will ensue if the 26,500 level is breached.

Resistances are present at 27,130 and 27,500. Inability to move beyond 27,130 will mean that the down-move will intensify.

Medium-term trend: The movement of the index last week proves that the up-move from May 7 was a corrective bounce. If the third leg of the correction or the C wave has resumed from the 28,071-peak, the downward targets are 25,845 and 24,470.

This also tallies with the Fibonacci supports for the index at 25,500 and then 24,500.

Global cues Most global benchmarks ended lower for the week. The worries over Greece moving close to a default roiled equities mid-week. Strong jobs data from US increased the probability of a US interest rate hike in September, further applying pressure on stock prices.

Investors appear nervous about the near-term prospects. This is reflected in the CBOE volatility index spiking to the high of 15.6 over the week before ending at 14.2. This index has been moving higher over the last two weeks in a short-term uptrend.

The Dow too declined around 1 per cent. But this index continues to rule above its short-term supports at 17,812 and 17,500.

The index is currently moving in a range of 17,500 and 18,300. Short-term outlook will turn negative only on a close below 17,500. Many of the Asian indices including Seoul Composite, Jakarta Composite and the SGX Nifty closed lower. The Shanghai Composite however continued its upward march, closing 8 per cent higher last week.

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