Trend up, but hurdle at 5,485

The markets continued to march upwards for the third straight week. Healthy corporate earnings and steady inflows from foreign institutional investors (FIIs) boosted sentiment. However, global events have kept a check on the upside so far. As a result of this, the Sensex has gained 670 points in the last three weeks.

This week, the Sensex touched a fresh 25-month high at 18,238, and finally settled with a gain of 169 points at 18,131.

The Sensex has been treading upwards on weekly charts since the first week of August, when the short-term (20-weeks) average broke above its long-term (200-weeks) moving average. The index is now around the higher end of the bollinger band on weekly charts, that is, near 18,300. Hence, one needs to remain cautious for early signs of weakness around these levels.

On the downside, the index may decline to 17,430-16,950 in the coming weeks. Next week, the Sensex may seek support around 17,900.

The NSE Nifty moved in a range of 124 points, and ended with a gain of 61 points at 5,449.

The Nifty has been showing signs of tiredness off late. The upside on weekly charts looks limited up to 5,485, while support is seen around 5,340

Next week, we could see increased volatility given the central bank’s policy meet and Reliance results on July 27, followed by the derivatives expiry on Thursday. RBI is expected to raise the cash reserve ratio by 25 basis points.