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B. Krishnakumar

Nifty (1872.35)

Preferred view: The market sentiment was distinctly lacklustre last week. The index remained unchanged on a week-to-week basis. After a modest rally on three days, the trend turned bearish on Friday. The Nifty registered a drop of about 20 points on Friday to close at 1872.35.

After a move past the positive trigger level of 1890, the index failed to hold above this level. After a close above this level on Thursday, the index dropped below the 1890-mark on Friday. The near-term outlook appears weak. The positive aspect is that the index is still ruling above a series of support levels that are closely bunched.

The 1850-1860 range is a crucial support level for the index. A drop below 1850 would have further negative implications. A breach of this range would result in the Nifty dropping to the earlier mentioned target zone of 1830-1835.

The short-term bearish view would be in force as long as the index trades below the positive trigger level of 1905. A move past 1905 would impart strength and would push the index to the target zone of 1935-1940. Those holding long positions may have a stop-loss at 1860.

Comments: As observed last week, the waning momentum behind the recent upward moves is evident in the daily charts. Considering that the index has run-up sharply in the last couple of months, a sizable correction both in terms of time and price may be imminent.

The price pattern in quite a few index stocks is similar to that of Nifty. The slowdown in momentum and the emergence of negative divergence is visible in quite a few stocks that form part of the index. Given this backdrop, the index is also likely to either remain range-bound or drop to lower levels.

Alternative view: Though a correction or at least a consolidation in the form of a sideways price action is the preferred view, a move past 1905 would impart bullish momentum. Those holding long positions may either tighten the stop-loss or may book partial profits by liquidating a portion of their holding. A move past 1905 could push the index to the 1935-1940 zone.

Sensex (5961.71)

The movement in the index was in line with expectations. Though the Sensex managed to record a nominal rise on three days, the gain recorded was almost wipe out by the drop on Friday.

After closing above the psychological 6000 mark, the index Sensex edged below this level on Friday. The near-term outlook remains weak and a drop to the 5750-5800 range appears likely. As observed last week, the bearish view would be confirmed if the Sensex declines below 5910.

Comments: In the Japanese Candlestick charts, a "bearish 3" pattern appears to have been completed on Friday. Though this pattern is not absolutely text-bookish, it is almost close to the ideal format. The implications are that the index is likely to seek lower levels.

Mid-cap stocks continue to attract buying interest while the large-cap ones were devoid of any significant momentum. Reports of a hike in lending rates by banks imparted positive sentiment towards the stock from the sector. Andhra Bank and Vijaya Bank were among the prominent gainers from the banking universe.

S&P CNX IT (2847.25)

The index ruled firm as anticipated last week. After moving to a high of 2881.8, the index turned weak on Friday. The CNX IT index appears on course to move to the target zone of 2950-2960. The bullish view would be in force as long as the index holds above 2790. A drop below 2790 would negate the positive outlook and would also push the index to the 2675-2680 range.

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