After a range-bound April, we saw a nervous start to May as the markets broke below the long-term (200-day) Daily Moving Average (DMA), precisely 19,160 on the Sensex.
The BSE benchmark index plunged almost 1,100 points in intra-week deals, to a low of 18,160, and then recovered partially to end the week with a loss of 617 points (3.2 per cent) at 18,519. Selling pressure from foreign investors coupled with some disappointment on the earnings front were couple of reasons for the weakness.
Among the Sensex 30 stocks — Bajaj Auto and Reliance Communications were the major losers, down over 10 per cent each at Rs 1,319 and Rs 90, respectively. Reliance Infrastructure, Sterlite Industries, Bharti Airtel, Jaiprakash Associates, Hindalco, SBI, HDFC, Tata Power and Mahindra & Mahindra were other major losers. Hero Honda and BHEL, however, ended on a winning note up around 3 per cent each.
The Sensex after a nervous start has broken all its crucial support on the moving averages and also on the monthly Fibonacci chart. According to the chart pattern, the Sensex is likely to face stiff resistance around 18,770-19,150. On the other hand, monthly Fibonacci chart indicate considerable resistance around 18,820-18,950. So, all-in-all, it seems a difficult road on the upside.
On the downside, the index has taken support precisely at 18,160 which happens to be a key support according to the quarterly Fibonacci chart. If the index were to break 18,160 then we could see further downside targets of 17,780 and 17,125 in the coming weeks.
A look at the NSE chart, too, indicate a similar picture. With more than three closes below the 200-day DMA, we are back in the so-called bear market, which means the late March and early April rally for an exit opportunity for those who were stuck in the sudden fall.
More From This Section
The short-term (20-day) DMA is on the verge of slipping below the long-term DMA, which will re-enforce the strength of the bears. According to the daily chart, an upside for the Nifty seems to be capped around 5,750 for now.
The weekly charts indicate there could be some sideways movement with the index range-bound within 5,350-5,750 band. The knock-out punch may come from the monthly charts, which indicate that a close below 5,420, can trigger a massive fall up to 4,700-odd levels.