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| Any relief rally may fizzle out |
| Rex Cano / Mumbai Mar 08, 2009, 00:56 IST |
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The markets slipped to over three-year lows this week, in tandem with world markets, which tumbled to multi-year lows. The Sensex, which began the week with a negative gap of 129 points at 8,763, hit a low of 8,047. However, the index recovered partially and closed the week with a loss of 6.4 per cent (566 points) at 8,326.
In the process, the Sensex broke its quarterly support of 8,435, and its month’s support of 8,205. Though the index closed the week at 8,326, chances of it breaching the next major support of 7,550 and further down at 6,675 remain high.
According to a counter view, since the domestic and global markets are in the oversold zone, there could be a strong relief rally in the offing. However, it seems unlikely that the domestic market may sustain at higher levels. And, any relief rally during the coming week is likely to fizzle out sooner or later.
Till now in March, the open and high levels for the Sensex have been the same. The index opened at 8,763, and that’s the high for the month so far. In the last 15 years, it is only on 17 occasions the index started the month with its opening and high levels being at the same level. Of the 17, the index ended lower on 13 occasions compared to the month’s opening. So one can assume that the index is likely to end at least below the month’s opening.
Technically, the 8,760-level remains a major hurdle for the index on the upside. In case the index crosses 8,760, then it may stretch to 8,900. On the downside, one needs to keep a watch on the 8,050-8,200 support zone. Once this zone is cleared, then the downmove may gain momentum.
In the coming week, the index is likely to face resistance around 8,600-8,685-8,770, while support on the downside would be around 8,050-7,970-7,880.
The NSE Nifty moved in a range of 225 points, the index dropped to a low of 2,539 from a high of 2,765, and finally settled with a loss of 5.2 per cent (144 points) at 2,620. The Nifty broke its crucial support of 2,575 before bouncing back. This breach indicates that the Nifty is likely to test 2,300-2,050 on the downside this month.
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