Next major support seen at 5,300 level

In the last update, it was mentioned that the markets may firm up only on strength above 5,745. However, despite a high of 5,802, the Nifty failed to close above 5,745 on any single day of the holiday-shortened week. The intra-day rallies were met with selling pressure at higher levels, and eventually the Nifty broke below its 200-DMA (Daily Moving Average) during the course of the week.

The RBI rate hike, futures & options expiry, fears of an earnings slowdown and selling by overseas funds weighed on the market sentiment this week. The Nifty slumped to a low of 5,460 — down 342 points from a high of 5,802. The NSE benchmark index finally settled with a loss of 184 points at 5,512.

The Nifty has so far closed for two consecutive days, Thursday and Friday, below the long term 200-DMA, which is currently at 5,627. A third close would confirm the bearish grip. The likelihood of that happening seems more or else evident. The index has also given a weekly close below its 50-week moving average. Given the multitude of bearish indicators, one can easily conclude we are in a sell on the rallies market, until proven otherwise.

The broader trend for the next two months suggests that the upmove in the Nifty is likely to capped around 5,730, and in an extreme rally up to 5,900. On the downside, the next major support exists in the 5,250-5,300 zone, below which the index can slide to 5,100.

The Sensex moved in a range of over 1,000 points this week. The index touched a high of 19,341 and then tumbled to a low of 18,333. In the process, the index broke two crucial support levels of 18,742 (200-DMA) and 18,425 (yearly Fibonacci). The Sensex finally ended with a loss of 612 points at 18,396.

Among the index stocks, DLF slumped nearly 12 per cent to Rs 223. Mahindra & Mahindra, Hindustan Unilever, Reliance Communication, Reliance and Sterlite plunged 6-10 per cent each. Cipla, Hero Honda, Jindal Steel, Hindalco, Jaiprakash Associates, ICICI Bank, Bajaj Auto and Wipro are the other major losers. ONGC, however, gained nearly 3 per cent at Rs 1,136. NTPC and Tata Steel were the other notable gainers.

The next major support for the Sensex exists at 17,770. The upside for the index will be capped around 19,170-19,300.

Among the frontline stocks, ACC, Bharti Airtel, Cipla, Hero Honda, Infosys, Jindal Steel, Sterlite, Reliance Communication, Suzlon, Tata Power and Wipro are looking weak. On the other hand, HDFC, Larsen & Toubro, Maruti, ONGC and Sesa Goa may see weekly gains.