Any substantial volume increase could push the market out of the current range
Market wrap: The markets first slid on a series of negative developments, but recovered partially on value-buying later in the week. However, next week could begin weak because of news of VSNL's exposure to WorldCom and the generally dull sentiment on the Nasdaq.
Old-economy stocks hauled the Sensex back from an intra-day low of 3176 (Nifty 1042) to close of 3244.7, a marginal gain. The Nifty lost 0.44 per cent and closed at 1057.8, while the Defty lost 0.30 per cent as the rupee strengthened against the dollar. The breadth signals were slightly more positive. Advances outnumbered declines on Friday, while volumes stayed reasonable. The BSE 500 was down by just 0.24 per cent.
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Outlook: As of now, the market is stuck between a very narrow groove of Sensex 3150-3275, accompanied by low to moderate trading volumes. Any substantial volume increase could push the market out of that range. A downside break would probably find support at 3056-3075, if it didn't stop at 3120.
An upside break could push the market to 3450. This week's formation is an incomplete saucer. This would be bullish (minimum target of 3375) if the formation is completed with a breakout past 3275.
Rationale: Institutional selling pressure has eased marginally; FIIs were net buyers in the past 2-3 sessions. But there will be plenty of nervousness in tech stocks. Old economy scrips could gain if the market believes the latest GDP numbers. The long-awaited cabinet reshuffle could move the market either way. The health of Dhirubhai Ambani could also influence sentiment - especially since there are small investors in the fray.
Counter view: Most of the above factors are likely to have a negative impact. The lack of selling pressure is not, in itself, enough to push up a bearish market. But the resilience shown on Thursday and Friday suggests that the market may hold or move up. And a move past 3275 would probably lead to a sharp technical rally. There are really no strong trending signals.
Bulls and bears: Most of the bullishness centres around old-economy stocks. Power sector stocks like ABB, Bhel, Seimens seem to be perking up. Steel stocks are definitely on a roll - Tisco and Jindal Steel both broke through important resistance levels this week. Big IT stocks like Infosys and Satyam may be on the way up after a bad fortnight. The hammering in VSNL will continue. Previously bullish stocks like Leyland, Bilt, TVS retain their potential. The priceline of HDFC Bank appears to be in some trouble while Colgate and Escorts are starting to look promising.