Global cues to dictate terms

WEEKLY TECHNICAL ANALYSIS

In a dramatic turn of events last week, technicals and fundamentals took a back seat as global markets went into a huge roller-coaster ride. News from the US — Lehman Brothers filing for bankruptcy, Bank of America buying Merrill Lynch and US Fed bailing out AIG — kept world markets on their toes.

In India too, major indices, the Sensex and the Nifty, swung over 12 per cent each. After a bearish start, the Sensex slumped to a low of 12,558 and then bounced back sharply on Friday, in tandem with the world markets, to a high of 14,097. The index finally ended the week with a marginal gain of 41 points at 14,042.

The monthly support base of 13,350-13,500 mentioned for the index was violated easily in intra-day trades. Although the index managed to close above the 13,500 mark on Monday and Tuesday, continued bad news from the US sent the index crashing close to its July low of 12,500. The pull-back was an extraordinary one as the index zoomed over 12 per cent in just two trading days.

The current pull-back may see the index rising up to 14,560-14,630 levels. On the downside, the index may seek support around 13,450-13,100 levels.

Among the Sensex stocks, Reliance and HDFC surged 6 per cent each. Maruti, NTPC, ONGC, HDFC Bank, SBI and Tata Motors rallied 3-5 per cent each. On the other hand, Ranbaxy plunged over 21 per cent and Jaiprakash Associates tumbled over 14 per cent. Satyam, DLF, Tata Steel, Hindalco, TCS, Reliance Communications, Sterlite, Reliance Infrastructure and ICICI Bank shed 4-9 per cent each.

The NSE Nifty moved in a broad range of 463 points. From a low of 3,800, the index bounced back to a high 4,263 and finally settled with a gain of 17 points at 4,245.

The Nifty needs to close above the 4,300 mark to sustain the current upmove. The mid-term (50 days) average is above the short-term (20 days) average, which is a negative sign.

This week, the index may rally up to 4,420-4,530, while on the downside, it may drop to 4,070-3,960.

Overall, global cues and fund flows are likely to dictate terms in the short term.