Pivot point for Sensex is 17,200

The markets behaved exactly on expected lines, as the early week gains got tempered towards the end of the week. The markets had got a fillip early on, owing to the surprise CRR cut and positive cues from the global markets. However, a status-quo policy by the Reserve Bank of India on March 15 and a tepid Budget on March 16 saw the markets change course dramatically.

The Sensex had touched a high of 18,041 (we had mentioned resistance for the index around 18,075 and 18,300). From thereon, the index tumbled to a low of 17,427, and eventually ended with a marginal loss of 37 points at 17,466.

Among the index stocks, Sun Pharma shed 4.5 per cent at Rs 545. DLF, Bharti Airtel, ONGC, TCS, HDFC Bank and Tata Power were the other major losers, down over three per cent each. On the other hand, Gail India surged over five per cent to Rs 367. Hindalco, ITC and Tata Motors were the other significant gainers.

Last week, we had mentioned that according to the Fibonacci charts, the Sensex looks weak on the monthly and quarterly charts. Hence, we were expecting a downside target of 16,500 on the index by this month end. The same theory still holds true, though with a condition that the index consistently remains below 17,200.

In other words, there seems to be a possibility that the Sensex sustains above 17,200, in which case a deeper correction can be ruled out. Also, in the interim, between 17,200 and 16,500, the index has some support around 16,854-odd levels. On the positive front, the Sensex can rally to 17,700 or further higher to 17,850.

The NSE Nifty moved in a range of nearly 200 points: From a high of 5,499, the index tumbled to a low of 5,305, and settled with a marginal loss of 16 points at 5,318. In the process, the index ended in red for the fourth straight week, down 4.4 per cent, following the preceding seven-week rally of almost 17 per cent.

Despite the four-week correction, a deeper correction for the Nifty seems unlikely, unless the index cracks below the 5,200-level. In the short term, the index may re-attempt to move to 5,450 on the higher side, while a break of 5,200 could trigger a fall to 5,050-odd levels.

In the medium-term trend, the Nifty is now likely to enter a longer consolidation phase, wherein the index may move sideways between 5,600 on the higher side, and 4,950 on the lower side.