Back Weakness likely in the near term
B. Krishnakumar
Nifty (2091)
Preferred view: The market activity was marked by high degree of volatility during the week. The index was confined to a trading zone. Though the Nifty managed to close above the resistance level at 2110, it failed to hold above this level.
The near-term outlook appears bearish and the index could drop to the 2070-2080 range. The short-term bearish outlook would not, however, alter the view of a rally to the 2185-2190 range. The expected rally to this target zone would materialise on the completion of the short-term correction.
Comments: The inability of the index to hold above the resistance level at 2110 is a cause of concern. As observed last week, the positive outlook would be in force as long as the Nifty holds above support zone at 2025-2030. The momentum behind the rally in the ensuing days and the behaviour of key indicators at higher levels would provide clues about the nature of the rally. They could indicate if the if the expected move to the 2185-2190 range is the final move on the upside or a portion of an extended upward move.
Sensex (6782)
Preferred view: The index was stuck in a trading zone during the week. The lack of momentum and the lacklustre price action is a cause of concern from the medium-term perspective. The short-term trend has turned bearish owing to the sharp reversal on Friday.
The Sensex could drop to the 6650-6670 range before resuming the long-term uptrend. The recent price pattern and the expected short-term weakness would not negate the earlier view of rally to the 6900-6950 range. The positive view would be blunted if the Sensex closes below 6500.
Comments: The weakness in the technology sector stocks along with the bearish trend in old-economy stocks such as Tata Steel, ONGC, SAIL and Tata Engineering played a key role in dragging the index. The relatively firm trend in Reliance Industries contained the damage. The progress of monsoon and the market reaction to quarterly performance of the corporate sector would be the key developments that would influence market direction.
CNX IT (2896)
Though the index failed to move to the 3050-3100 range, it moved closer to this zone by recording a high of 2964 on Wednesday. The short-term trend is weak and a drop to the 2840-2850 range appears likely. The index could resume the earlier uptrend on the completion of the expected short-term weakness.
Readers can send in their queries, on not more than two companies, to
Queries can also be sent by post to:
Tech Trail, 859/860 Kasturi Buildings, Anna Salai, Chennai 600002
We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column.
© Copyright 2000 - 2009 The Hindu Business Line