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B. Krishnakumar

SENSEX (3647.6)

Preferred view: After threatening to break above the key resistance level of 3760, the trend turned bearish during the just-concluded week. The much-awaited correction materialised during the week. As mentioned last week, a drop to the 3450-3475 range appears likely in the near term.

A close below 3600 would be an early indicator of the onset of the downward correction. On the contrary, a break above 3850 could pave the way for a rally to the 4050-4100 range.

Comments: After touching a high of 3750 on Thursday, the index turned weak to close at 3647.6 on Friday. The index has also broken below the lower boundary of a well-defined upward channel. This, along with the trading pattern during the week, indicates that the downward correction is in its early stages.

Alternate view: While the index managed to move closer to the key level of 3760, it was unable to go past this range. While there is a possibility of a move to the 4050-4100 level, the view of a drop to the 2500-2600 range is still on the cards. The possibility of a drop to this range would be completely negated only if the index closes above the 4900 mark.

NIFTY (1140)

Preferred view: There was some early evidence of the onset of the much-expected downward correction. The inability of the index to make any progress on the upside and the drop in share price of quite a few companies, which have recorded sharp gains recently, indicates that the correction has set in.

As mentioned last week, the index is expected to drop to the 1070-1080 level. A decline below the 1145 mark that was mentioned last week could now pave the way for a drop to the above-mentioned range.

Comments: After some see-saw movement in the first three days of the week, the market sentiment turned distinctly weak in the last couple of days. The quarterly performance of Wipro and Mastek dented market sentiment towards technology stocks. The formation of the Bearish Engulfing pattern on Thursday, followed by another black candle on Friday, does not portray a positive picture.

Alternate view: As observed in earlier weeks, the behaviour of the index beyond the 1210 level would provide a valuable clue about the long-term trend. The price action in the next few weeks would provide further clarity about the market's direction.

S&P CNX 500 (904.3)

Preferred View: The index moved in sync with last week's expectations. After some sideways price action, there was a downside break-out on Friday. An across-the-board decline in share price of mid-cap stocks was evident last week. This indicates that there is some major profit booking from big-time players.

Comments: A Bearish Engulfing pattern that was completed on Thursday indicates that the index could see some subdued price action in the future. The weak trend in stocks such as Orchid Chemicals, Indian Rayon, Saw Pipes and Sesa Goa indicates the possibility of a further drop. On the downside, the index could seek support around the 800-810 zone.

NASDAQ (1708.5)

Preferred view: The index ruled bearish this week. However, the overall outlook for the index continues to remain positive. As mentioned last week, a move towards the 1875-1900 level appears likely. A rise above 1780 would impart bullish momentum in the index. At the moment, only a break below 1590 would impart bearish trend in the index.

Comments: After a sharp rally on Monday, the index closed on a weak note on the next three days of the week. It managed to stage a modest recovery on Friday. The overall trend remains positive and only a drop below 1590 would warrant a re-look at the bullish outlook.

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