| Week Ahead: Market may need a trigger |
| MACRO TECHNICALS |
| Devangshu Datta / New Delhi May 7, 2007 |
| There has been a massive amount of trading within 4025-4200 in the past and it will require a big volume expansion to push the market up decisively. |
| Despite the loss of two days trading, the market generated reasonable volumes while remaining effectively rangebound. The Nifty gained 0.83 per cent to close at 4117.35 while the Sensex gained 0.18 per cent to close at 13934.27 points. The Defty continued its outperformance on the back of rupee strength to close up by 0.99 per cent. |
| Market breadth was somewhat negative. However this showed up mainly in small caps. Midcaps did reasonably and the BSE 500 rose by 1.2 per cent. The BankNifty was down 1.68 per cent while the CNX IT index outdid the rest of the market to close up 2.56 per cent. |
| The FIIs were net negative, the Indian funds were net positive and one infers that retail investors were net sellers or simply absent from the poor small cap performance. |
| Outlook: The market is rangebound between 4025-4200. It may need a trigger for a breakout in either direction. It could continue trading inside this range indefinitely. Obviously a breakout past 4200 will test the all time highs (4239) and be positive if the market closes at a new high. |
| Rationale: There has been a massive amount of past trading within this zone and it will require a big volume expansion to push the market up decisively. On the downside, there is support till about 3950. |
| Counter-view: By definition, a bull market achieves successive peaks. The very fact that this intermediate uptrend hasn't generated a new high in 6 weeks of existence is a negative signal. |
| Also last week, the market failed to test its previous intermediate high (4217 April 26), which is another mildly negative signal. An intermediate trend can mature and reverse in 6 weeks so we could be in for another period of lower lows. |
| Bulls & bears: The bullishness was skewed in favour of large mid-caps and pivotals. Most of the outperformance of the CNXIT was attributable to just about five stock including Subex, Rolta, Tech Mahindra, Moser, etc |
