The Hindu Business Line : Bearish near-term trend continues

The near-term trend continues to be bearish. The index could drop to the immediate support level at 1940-1950 range. It remains to be seen if this support zone arrests the recent downtrend.

While a drop below 1940 would be a bearish sign, the breach of 1890 would result in prolonged weakness.

The recent price pattern indicates that the index could drop to 1940-1950 range and consolidate at this range for a while.

A move past the immediate high of 2012 would impart strength. A close above 2014 may result in the index nudging the 2100-mark.

Comments: The sustained weakness in the price of Reliance Industries played a key role in pulling down the benchmark indices during the week.

The weakness last week has resulted in the breach of an upward sloping trend line of the 14-day Relative Strength Index. This again is a sign of bearishness and the Nifty could seek lower levels in the near term.

Along with Reliance, quite a few large cap stock ruled weak. The likes of HDFC, ITC and Ranbaxy turned weak in the past few days. It was a case of a mixed bag in the mid-cap sector stocks. Market interest was evident sugar and hotel sector stocks. Top gainers in the sugar industry include Balrampur Chini, Dhampur Sugar and Bajaj Hindustan. In the hotel sector, Indian Hotels, Hotel Leela and EIH ruled firm.

Alternate view: The drop to the immediate support level at 1940-1960, and a subsequent resumption of the rally is preferred. This view would be negated if the index declines below 1890. As observed earlier, this would result in a more prolonged phase of weakness. Except for Reliance, the outlook for quite a few index stocks appears positive. Taking this into account, it appears that the Nifty could resume the rally shortly.

SENSEX (6233.54)

Similar to Nifty, the trend in the Sensex too was weak. The near-term trend continues to be bearish. The index is ruling close to the support area of 6150, which is the peak of the bullish phase witnessed in the year 2000. The outlook remains bearish and a drop below 6140 would be a sign of further weakness.

The pattern of lower highs and lower lows recorded in the past few days tends to confirm the weak outlook. As highlighted in the earlier weeks, periodical profit-booking may be in order. Investors need to get into an alert mode and take partial profits in stocks that have run up significantly.

Employing a trailing stop-loss for a portion of the holding may be an effective method to lock-in unrealised gains.

Comments: The recovery in the value of the American Dollar and the weakness in the price of gold and crude oil was the highlight of the week's trading.

On the liquidity front, the FII activity might taper off as the year 2004 draws to an end. The last two weeks of December marks the festive season in the western world. Given this backdrop, there are chances of a dry-up in liquidity or a slowdown in FII inflows that, in turn, may keep the key market indices in a depressed mode.

S&P CNX IT (2880.55)

The index ruled weak as anticipated last week. Though there is a possibility of a short-term bounce, the recovery is likely to be short-lived.

The downward move does not appear complete. After the expected short-term rally, the index is likely to seek lower levels of 2800-2810. Only a close above 3015 would impart bullishness.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Investment quiz

Funding your retirement