• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

B. Krishnakumar

NIFTY (1523.1)

Preferred view: The index ruled firm and moved past the target zone of 1490-1500. After halting for a couple of days at this range, the index resumed its uptrend in the last couple of trading sessions. In the process, Nifty has now managed to move closer to the crucial bullish trigger level of 1550. The index appears to be headed towards the next target zone of 1570-1590. While the overall outlook continues to remain positive, the development of negative divergence between the price movement and the 14-day Relative Strength Index is a cause of concern.

The emergence of the negative divergence in the weekly charts is a serious negative development to take note of. The index is likely to embark on a prolonged downward correction both in terms of price and time. On the downside, the 1420-1430 range is the first level that could offer support. A break below this level could lead to a much deeper correction.

Comments: The stock market sentiment remained distinctly bullish last week. The recent rally has been marked by steady run-up in prices without any significant downward correction. Such an extended rise would, eventually, be halted by a correction that is quite sharp in terms of price and time. Investors should not hesitate to take profits, the moment the index displays signs of sustained weakness.

Alternative view: The sustained upmove and the momentum behind the rally has now almost nullified the possibility of a drop to 849 level. Only a close below 1050 would warrant a re-look at this view.

SENSEX (4768.9)

Preferred view: Similar to the Nifty, Sensex too managed to move past the target zone of 4700-4720 mentioned last week. The Q2 performance of some software companies has imparted momentum in the index. A move to the 4850-4900 range appears likely. A close below 4550 would be an early indicator of the onset of a downward correction.

Comments: The market appears to be happy with Infosys' performance. This effectively indicates that the stock market has crossed one of the major initial hurdles. The performance of old-economy stocks is not surrounded by the kind of uncertainty and apprehension that is associated with technology companies. The flow of corporate performance could be expected to keep the momentum on. On Friday, an upward gap is evident in the daily chart. Index behaviour in the next couple of days would be crucial in determining the near-term trend.

S&P CNX 500 (1208.3)

Preferred View: The index ruled strong and inched closer to the target zone of 1350-1400. While the index ruled firm on Friday, some exhaustion was evident in quite a few mid-cap stocks. The emergence of a series of multiple negative divergence indicates that the recent rally is headed towards a correction.

Comments: A drop below 1150 would indicate the onset of a corrective phase to the recent uptrend. While the outlook for stocks such as Kotak Mahindra Bank and ABB appears positive, the index appears overstretched.

CNX IT Index (18231)

Preferred View: As anticipated, the index managed to seek higher levels. Aided by the flow of improved financial performance of software heavy weights, the index saw a firm trend last week. This helped the index move closer to the earlier mentioned target of 19000. While the near-term outlook appears positive, a drop below 16600 would impart weakness.

NASDAQ COMPOSITE (1915.31)

It ruled strong as expected last week. It appears on course to move to the projected target zone of 2090-2100. A move past the positive trigger level of 1914 has now imparted bullishness and could keep the upward momentum on.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Reject open offer for Swaraj group cos

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line