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B. Krishnakumar

NIFTY (2062.7)

Preferred view: The market sentiment remained distinctly bullish during the week.

Not only did the Nifty manage to hold above the negative trigger level of 2000, it also moved past the positive trigger level of 2050.

The latter has negated the earlier short-term bearish view.

The index appears on course to move to the immediate target zone of 2100-2120 range.

The positive view would be in force as long as the index stays above 2005.

Comment: The sharp recovery in the price of Reliance Industries was the highlight of the week. Market interest was also focussed on the banking and sugar sector stocks as well. The long-term trend appears to be bullish.

The positive view for the Nifty is also supported by the patterns in the 14-day relative strength index (RSI).

In the past couple of weeks, the 14-day RSI was portraying weakness; it has now broken past a "contracting

triangle" pattern. This is a reliable sign of bullishness.

Besides, quite a few other indicators, too, have triggered a "buy" signal.

Popular indicators such as the MACD and a couple of proprietary indicators have a positive bias without venturing into the oversold zone.

Such a bounce is an indicator of market strength and George Lane, the developer of the indicator called the Stochastic Oscillator (SO), termed this bounce as a "pop". If the SO moves past the 80 level on a scale of 0-100, equities are considered to be in an overbought zone.

If it goes past the 90-mark, it is treated as an extreme level. Usually declines from such a stage tends to be pronounced. But there are exceptions when it bounces back sharply from the 75-85 level. If this happens, it is termed as `pop' and leads to a

continuation of the underlying trend.

A sharp upward move follows after the occurrence of the "pop".

Alternate view: A move to the target zone of 2100-2120 range is the preferred view. Such a view would be negated if the index drops below the 2005 level.

While the short-term trend would turn bearish on a breach of the 2005 mark, it would not negate the long-term bullish outlook.

SENSEX (6498.1)

The patterns in the Sensex were similar to that of the Nifty. A buoyant trend was evident in the case of Sensex as well and the index also moved past the 6500 mark on Friday.

The near-term trend has turned positive. Only a drop below the bearish trigger level of 6320 would negate the bullish outlook. Along with the key indices such as the Sensex and the Nifty, the outlook for quite a few large and mid-cap stocks appears bullish. Several stocks appear set to take-off on the next leg of the rally, which could be compressed in the short time period and also involve a substantial upside.

This would be characterised as a Wave-3 move in Elliott Wave parlance.

Comment: The recovery in the share price of Reliance Industries was the major factor behind the firm trend in the indices. Reliance has convened a board meeting on Monday to decide on the proposal to buy back shares.

This announcement and the revocation of the sweat equity allotted to Mr Mukesh Ambani in Reliance Infocomm played a major role in stemming the slide in the stock price.

While quite a few private sector banks attracted market interest in the earlier weeks, the focus shifted to the stocks of public sector banks during the past week.

Buying frenzy was evident in stocks such as Andhra Bank, Bank

of India, Syndicate Bank and Bank of Baroda. The outlook for these stocks remains bullish and shareholders may remain invested in these stocks.

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