Bias positive, but trade cautiously

Despite a strong rally in the second half of the week, the markets ended with marginal losses this week. The markets mostly swung in line with the global cues by starting the week on a dismal note but recovering towards the end. The Sensex slumped to a low of 16,561 in the first half of the week. Thereafter, it recovered and rallied to a high of 17,132, up 571 points from the week’s low. It finally ended the week with a marginal loss of 53 points at 17,065.

Among Sensex stocks, DLF slumped 7 per cent to Rs 262, followed by Hindalco (down 5.5 per cent). Infosys, ITC, Tata Steel, ICICI Bank and Sterlite were the other major losers. On the other hand, Cipla, Mahindra & Mahindra, HDFC Bank, Reliance Communications, BHEL, ACC, Maruti and HDFC were the prominent gainers.

This week, the markets made a higher low, and a lower top. While a higher low is considered a positive sign, the negatives of a lower top can easily be overcome given the fact that the Sensex has closed near the highs. However, on the upside, one needs to watch out for resistance around 17,300, above which the index may rise to 17,500. On the downside, the 16,550 should act as a support, the break of which could trigger a fresh slide up to 16,350-15,950.

Although the bias is still positive, the trend is quite confusing at current levels. Hence, one needs to trade cautiously and be prepared for more volatile movement in the coming days.

The NSE Nifty moved in a range of 172 points — from a low of 4,967, the index surged to a high of 5,139, and finally ended with a loss of 16 points at 5,119.

Next week, the Nifty is likely to face resistance around 51,85-5,205-5,225, and seek support around 5,055-5,035-5,013. More or less, the Nifty is likely to swing in the trading band of 4,950-5,150. Short-term (20-days), medium-term (50-days) and long-term (200-days) moving averages are converging around 5,020-5,040. Hence, look for considerable support around these levels.