A good beginning to sustain rally

As expected, the markets recorded fresh two-year peaks at the start of the week, and consolidated later. The Sensex touched a high of 17,793, then fell to a low of 17,489 before settling with a gain of 48 points at 17,693. In the process, the index has extended its winning streak to the eight straight week. The Sensex has rallied over 11 per cent (1,777 points) during the period.

The markets closed the financial year 2009-10 on a positive note. While the Sensex surged over 80 per cent during the year, the index was up 6.7 per cent in March 2010.

HDFC, up nearly 7 per cent at Rs 2,782, was the top gainer among the Sensex stocks this week. It was followed by DLF, Sterlite, Tata Motors, Hindalco and NTPC, up 3-5 per cent each. On the other hand, Infosys shed nearly 4 per cent to Rs 2,671, followed by Hero Honda, Hindustan Unilever, Bharti Airtel and TCS down 2-3 per cent each.

Going forward, the first two days of the week will be crucial for the index to sustain the rally. In case the markets end up on these two days, then the Sensex may rally sharply towards the end of the week, which includes the possibility of the index crossing the 18,000-mark. On the negative side, a weak closing on the first two days could escalate selling in the latter part of the week.

Crucial levels during the week are resistance around 17,800-17,880, above which the index may spurt up to 18,050-18,350 during the course of the month. On the downside, the index is likely to seek support around 17,575-17,500.

The NSE Nifty moved in a range of 94 points, from a high of 5,330, the index dropped to a low of 5,235, and finally settled with a gain of 17 points at 5,291.

The Nifty may face resistance around 5,325-5,350, while it may find support around 5,255-5,230.

The index continues to exhibit bullishness. The short-term moving average is currently at 5,196 (20-days) and the medium-term moving average is at 5,020 (50-days).