Nifty nears hurdle around 5,200

The markets ended higher for the third straight week, with the BSE benchmark index, the Sensex, gaining as much as 3.6 per cent (584 points) at 16,739. During the week, it maintained an upward trajectory, registering a higher mark each trading day of the week. The Sensex ended at a six-week high, up 8.3 per cent this calendar year.

Among the Sensex stocks, Maruti Suzuki was the major gainer this week, up 12.5 per cent at Rs 1,099. Sterlite Industries, Tata Power, Bajaj Auto, Hero MotoCorp, DLF, SBI, Larsen & Toubro, Reliance Industries and Hindalco were the other major gainers, up 8-10 per cent each. On the other hand, Mahindra & Mahindra was the major loser, down five per cent at Rs 656. ITC, down 2.5 per cent, was the other prominent loser.

The Fibonacci chart indicates the Sensex has given a buy signal on the monthly and quarterly charts. The monthly charts indicate the index is likely to exhibit bullishness as long as it sustains above 16,600, whereas the bullish pivot on the quarterly charts is at 16,500. The next hurdles on the quarterly charts are 16,840 and 17,175. At the start of the year, we had mentioned the first major hurdle would be 17,500. Going by the current bullish momentum, this looks possible.

On the flip side, if the Sensex is unable to sustain above 16,500, we could see a further 350-point dip to 16,170-odd levels. The NSE Nifty moved in a range of 237 points: From an early low of 4,827, the index rallied to a high of 5,064 and finally ended with a gain of 3.8 per cent (183 points) at 5,049. The index has seen a sharper appreciation (9.2 per cent this year), compared to the Sensex owing to the higher weightage of banking and metal stocks.

The Nifty, after crossing its 200-WMA (weekly moving average) in the preceding week, has crossed yet another hurdle of 20-WMA. The next major hurdle would be 50-WMA, currently at 5,260. Also, the 200-DMA (daily moving average) is at 5,220. Technically, the two hurdles are likely to be decisive for the markets, as the Nifty has consistently failed to cross since breaking below these in early May 2011. The current momentum seems fairly bullish on the daily and weekly charts, as the momentum oscillators indicate further upside. However, given the overbought conditions, one should watch the 5,025-level closely for any signs of profit-taking or a correction in the next week. In case of a correction, the Nifty will seek support around 4,950 (its previous hurdle) and a deeper correction could see a slide to 4,825.