Week Ahead: Range-trading between 4500-4900

MACRO TECHNICALS

The market saw net losses after violent fluctuations. The Nifty ranged between a high of 4947 (Monday) and a low of 4628 (Tuesday) before closing at 4647 for a net loss of 5.97 per cent.

The Sensex was down 6.28 per cent, closing at 15343 points. The Defty lost 6.3 per cent. The rupee rose to nearly 39 before the RBI intervened to push it back down to 40. FIIs and domestic institutions were net sellers.

Market volumes were low except on Monday when prices dropped on high volumes. Declines far outnumbered advances. The Junior was down 6.3 per cent; the Midcap 50 did comparatively better, losing only 3.22 per cent. The BSE 500 was down 5.5 per cent.

Outlook: Be braced for extreme volatility and 150-point Nifty sessions. The market is more likely to move up than down next week. Range-trading between 4500-4900 is the likeliest possibility. If it closes below 4500, the bear market will intensify.

Rationale: There is some support at current levels and all the way down to 4500. The intermediate trend can be tentatively classified neutral - the lows of last week were higher than the lows of Mid-March. The market is oversold on short-term indicators. A technical bounce will run into resistance above 4900.

Counter-view: Friday saw very bearish trading and another couple of down-sessions like that will test the supports between 4450-4500 that held in Mid-March. The first wave in a new bear market can last three months or longer. If it does, the Nifty will drop below 4400. The long-term trend has been negative since January 10.

Bulls and Bears: It seems ironic to talk about bulls in such a scenario. Obviously bearish counters predominate but some will recover if there