It was another bearish week and the market hit the lowest levels seen so far in 2008. Volumes were reasonable, except on Friday when they were low. Declines far outnumbered advances.
The Nifty Junior was down 3.18 per cent and the Midcaps-50 was down 1.57 per cent, while the BSE 500 lost 2.37 per cent. The FIIs remained heavy sellers while domestic institutions were token buyers.
Outlook: The market is likely to range between 4,400 and 4,800 in the nine sessions preceding settlement and possibly test both ends of this range. A breakout beyond 4,800 is very unlikely, but if there is a downside break below 4,400, the market could drop till 4,200.
Rationale: The support at 4,400 was tested on several sessions and proved durable. But, resistances exist all the way up to 4,750-4,800. Huge volume expansion would be required to break those resistances and such volume expansion seems unlikely. The downside support is more likely to crack than the upside resistances.
A downside breakout will be quite dangerous given the lack of visible supports below 4,400. There would be a target projection till 4,200 and that is backed by huge outstanding positions in the 4,200p.
Counter-view: Given that index futures are trading at substantial discounts to spot values, the VIX is up and sector breadth is strongly negative, a substantial upside is unlikely. But, we could have big corrective sessions on short covering where the Nifty zooms by 100-plus points. A lot depends on the reversal of FII attitudes