Weakness Remains, But Steel May Shine

Even as bargain hunters support the market, a sustained uptrend is unlikely without a healthy rise in volumes

Market wrap: A recovery was halted by a combination of profit-booking in PSU stocks, coupled with heavy pressure on tech majors. After a Friday decline, the Sensex ended at 3217.76, a gain of 2.95 per cent. The Nifty went up by 1.94 per cent to close at 1048.8, while the Defty was up 1.88 per cent. The Broad BSE 500 was up 1.80 per cent. Breadth was poor with declines exceeding advances even during the pivotal upswing. Volumes were low, and the Put-Call ratio oversold.

 

Outlook: The indices are likely to continue ranged trading between 1,020-1,070 for the Nifty (and around 3,100-3,275 for the Sensex). The market is likely to remain weak next week with support coming in on declines. There is support at 3,200, 3,165 as well as at 3100 levels.

The short-term weakness is wedded to a neutral intermediate trend. There is very strong resistance around 3,265-3,275, which is where the 200 DMA is at right now. This is a bad sign for the long-term trend. A downside break past 1,020 could mean a 950 (2,750 Sensex) target.

Rationale: The Tata-VSNL spat has affected local sentiment. Traders are booking profits in PSU stocks. The Nasdaq