The Hindu Business Line : At best, a relief rally in prospect

Preferred view: The market action last week was no different from what it was the week earlier. After a strong rally on Monday, the momentum waned and the index drifted aimlessly in a narrow range. Though the Nifty breached the negative trigger of 1974 on Wednesday, it closed above this level.

The lack of momentum on subsequent days is, however, a cause for concern. Though the index may manage to move to the target zone of the 2030-2040 range, it is likely to reverse direction at that level. The medium-term trend does not appear positive. Only a close above 2090 would help push index get into a bullish phase.

After moving to the target zone of 2030-2040, the index could resume the downtrend towards the 1930-1940 band. A close below 1974 would confirm the short-term bearish view.

Sensex (6499.5)

Preferred view: The index managed to move to the target zone of 6525-6550 that was mentioned last week. It failed to hold at these levels and closed lower at 6499.5 on Friday.

The near-term trend does not appear positive. The index could face resistance at the 6550-6570 range. As observed a couple of weeks ago, the minimum requirement for the completion of a bearish "head and shoulder" pattern is now in place. A close below 6350 would indicate the start of the downtrend move towards the first support zone at 5900-6000.

Comment: The weak trend in old-economy stocks — Reliance Industries in particular — was instrumental in affecting market sentiment.

The index would have recorded a sharper decline for the week but for the firm trend in information technology sector stocks.

Software stocks such as Infosys, Satyam and Wipro managed to settle at higher levels, which helped the key indices to hold ground.

CNX IT (2724.55)

The index ruled firm as anticipated last week. The CNX IT index appears on course to hit the target zone of the 2775-2800 range. Holders of long positions may place the stop-loss at 2650. Fresh exposures may be considered on weakness, with a stop-loss at 2650.

CNX Mid Cap 200 (2979.05)

The Mid Cap index has had a phenomenal bull run in recent years. The long-term trend remains bullish, indicating that the frenzy for mid-cap stocks is unlikely to subside in a hurry.

The recent price pattern, however, indicates that the index could correct to lower levels of the 2820-2830 range.

After the completion of the anticipated correction, the index is likely to resume the rally to the 3150-3200 range.

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