Monthly charts point to hurdle at about 5,950

The markets rallied sharply last week, owing to aggressive buying by foreign investors. They remained buoyant through the holiday-shortened week. The Sensex scaled to a year's high, aided by an 800-point rally in the last three trading sessions. It ended the week with a gain of 4.5 per cent at 19,340, the highest close in 19 months.

Among Sensex stocks, Sterlite Industries soared about 13 per cent to Rs 109, while Bharti Airtel rose 10.5 per cent to Rs 337. Cipla, HDFC, Hindalco, Wipro, Jindal Steel, ICICI Bank and Bajaj Auto were the other major gainers, each gaining about six per cent. Maruti Suzuki and Mahindra & Mahindra fell about a per cent each.

As we step into a new month, let's consider the key monthly support and resistance levels. The bias seems positive. The BSE index may face resistance at 19,765-20,030. On the downside, the index may slip to 18,900-18,650.

Going by the quarterly charts, one needs to watch the 18,760-odd levels carefully in December, as a break and close below 18,760 may open the doors to a steep slide to 17,900-17,400 during the month. On the upside, the Sensex has to clear the 19,630 hurdle for a rise to 19,900-20,170.

As expected, the NSE Nifty, once above 5,685, saw a sharp rally. The index moved in a range of 260-odd points---from a low of 5,623, it zoomed to a high of 5,885, ending at 5,880, a gain of 253 points.

The momentum oscillators, both on the daily and the weekly charts, are clearly in favour of the bulls. The only concern is the month charts, which indicate some resistance for the NSE index at 5,950-odd levels. As long as the index breaks and sustains at above 5,950, we could see a further rise in the markets.

On the flip side, the NSE index's failure to sustain at above 5,950 should be seen as an early warning sign of a likely correction. In the event of a correction, the Nifty may drop to 5,700-odd levels in the near term.