Bears to dominate below 5,460

The markets grinded lower amid weak global cues and a fresh interest rate rise by the Reserve Bank of India. The key benchmark indices broke some key support levels and are poised tantalisingly at crucial support levels.

The Sensex touched a high of 18,380, but, thereafter fell and broke the psychological 18,000-mark to end the week at 17,871, a loss of 2.2 per cent. The index is now close to its recent low of 17,786, touched on May 25, 2010.

Heavyweight Reliance Industries was a major loser, as the stock crashed eight per cent to settle at a new 23-month low of Rs 868. Hindalco, too, dropped eight per cent, followed by TCS, Wipro, Maruti Suzuki and Sterlite Industries, down five-seven per cent each. However, Reliance Infrastructure gained 6.5 per cent to touch Rs 581. Hindustan Unilever and Reliance Communications were the other major gainers.

The Sensex has given a sell signal according to the monthly Fibonacci chart, the momentum oscillators too favour a further downside. One needs to watch the 17,940-level closely for market directions. The bears will continue to dominate as long as the index trades below the above-mentioned level, with downside possibilities of 17,760-17,600.

On the positive front (remote at the moment), if the Sensex is able to sustain above 17,940, we could see a counter rally led by short-covering which could lead the Sensex to 18,180-18,500.

The NSE Nifty swung in a range of 164 points. From a high of 5,520, it plunged to a low of 5,356, and ended with a loss of 2.2 per cent at 5,366. The trend deciding point on the Nifty is 5,460, below which the scenario remains bearish.

The monthly Fibonacci-based support is coinciding with the recent low of 5,330. Hence, this particular level becomes all the more significant for the Nifty.

The chart pattern indicates a break of 5,330 could take the Nifty to 5,200 (lower end of the Bollinger Band on the weekly chart). Below 5,200, we could see significant weakness, with a massive fall up to the 4,800-odd levels not being ruled out.