Downside Bias Persists, Tata Stocks In A Bear Grip

Sensex could slid to 2750 and Nifty to 950, unless war fears recede and buying interest emerges

Market wrap: The market continued to trade weakly in response to the continuing Indo-Pak tensions. The Sensex ended lower by 3.98 per cent to close at 3,125.73. The Nifty was down 3.6 per cent at 1,028.80. The Dollex was off 3.48 per cent, as the rupee firmed up while the broad BSE-500 was off 2.8 per cent. Breadth remained weak with advances far outstripped by declines. Trading volumes improved slightly and so did the Put-Call ratio.

Outlook: The market will probably remain pinned within a range. It has been held up by support at the 3,100 level, but with a downside bias. There is another support level at around 3,050 and a worsening political situation could test that .On the upside, there is a huge resistance at 3,265 where, incidentally, the crucial 200 DMA will be pierced.

 

Rationale: Until the Indo-Pak situation is resolved, most traders and FIIs will remain cautious and unwilling to commit themselves strongly in either direction. There is a poor long-term signal in that both the Sensex and Nifty appear to have completed a bearish Head and Shoulders formation plus downside breakout. Projected targets could be as severe as a drop to 950 for the Nifty and up to 2,750 for the Sensex.

Counter view: However, if the political situation clears up and the tension eases, relief buying could certainly send the markets higher. We could then see upside targets of approximately 1,140 for the Nifty and 3,450 for the Sensex. Time targets for a resolution in either direction aren