Nifty likely to break 200-DMA

The Sensex broke below its near-support of 19,300-odd levels early during the week. As the week progressed, the markets continued to slide. The BSE index touched a low of 18,669 and ended at 18,735, a loss of 692 points.

Among the Sensex stocks, Bhel and Tata Steel fell to Rs 180 and Rs 322, respectively, a decline of about nine per cent each. State Bank of India, Maruti Suzuki, ONGC, Larsen & Toubro, Tata Motors and Coal India dropped seven to eight per cent each. Sterlite, Hindalco, Tata Power and Mahindra & Mahindra were the other major losers. ITC (up one per cent) and Hindustan Unilever were the only gainers.

According to the monthly Fibonacci charts, the Sensex has near support at 18,600-odd levels, below which it could slide to 18,400 and 18,100-odd levels. On the upside, for a meaningful pull-back, the index has to sustain above 18,900.

The weekly charts show next week, the Sensex may seek support at 18,465-18,295. On the upside, it is likely to face resistance at 19,005-19,175.

From a high of 5,864, the National Stock Exchange Nifty fell to a low of 5,632. It ended the week at 5,651, a loss of 3.8 per cent (221 points). Now, the Nifty is within striking distance of its long-term daily moving average (DMA)---5,618. The index may seek support around the same level. Given the oversold market conditions, a sharp pull-back from these levels cannot be ruled out.

However, one should be wary such a pull-back, as this is likely to be more of a relief rally, not a fresh rise. A pull-back, if any, could witness strong selling pressure at 5,820-5,890.

Given the strong downward bias, it is likely the Nifty may break the 200-day DMA. The momentum oscillators on the daily and weekly charts are both in favour of the bears. According to the weekly charts, the fall could stretch to 5,520-odd levels. A fall to 5,315-odd levels cannot be ruled out.

Next week, the markets may continue to remain choppy, owing to two trading holidays, the March derivatives expiry and global news. Therefore, it would be best to wait for bottoming-out, before venturing into fresh long positions.

To sum up, the bias continues to remain in favour of the bears. On the downside, the Nifty could slide to 5,520-odd levels. However, in the interim, the index may seek support around the 200-day DMA of 5,618. A relief rally from this level can't be ruled out.