Nifty Future has support at 4300, 4265 and 4190 levels. It will face Resistance at 4445 and 4540 levels. In the forthcoming week, Nifty must retain back its momentum and break out from the sideways movement, otherwise, bears would take control. Thus, for the Bulls to remain in view, support level of 4265-300 level must be maintained.
: Wait for more signals before turning positive
At the recent low of 12514 points, the Sensex has tested the 12800-12000-pts support zone and has since then attempted a corrective rally. During the past trend phases in the Sensex, a monthly moving average convergence/divergence (MACD) cross-down below its trigger line, have, typically, led to a significant value erosion, with the corrective phase lasting, at least, for a year.
Therefore, immediate rallies would be interpreted as corrective in nature until the medium-term technical parameters turn positive. The recent upmove in the Sensex since the low of 12514 pts has been very sharp. The upside gap of July 23, 2008 had created a bullish 'Island Reversal Gap' on the daily charts between 14510 pts and 14519 pts.
Normally, the implications of this on the medium-term outlook would be very positive, especially since the "Island" comprised of 22 trading sessions. When a stock indicates an uptrend, trades above the gap which occurs, then gaps back down and trades below the initial price, an island reversal has occurred
However, the Sensex has since run into a strong resistance zone between 15026 pts and 15390 pts. The monthly mid-point of June 2008 is at 15026 pts. The 50% retracement level of the fall from the May 2008 peak (17735 pts) is at 15124 pts. The positive implications of the bullish "Island Reversal Gap" would thus get negated if the Sensex has a daily close below 14104 pts (the close on July 22, 2008). The Sensex is then expected to have an initial downside of 13513 pts, the 61.8% Fibonacci retracement level of the recent rise from 12514 pts to 15130 pts.
: f the bearish "Island reversal gap" of 14484-14568 pts is immediately filled and the Sensex manages to decisively overhaul the resistances between 15130 pts and 15390 pts, the ongoing upmove would continue. The Sensex may then test higher levels between 16618 pts and 16860 pts.
The 78.6% Fibonacci retracement level of the fall from the May 2008 peak is at 16618 pts while 16860 pts is the 50% retracement level of the entire fall from the January 2008 peak. Hence, one would await further confirmation before turning positive on the medium-term outlook.
India stock investors should buy on dips: Lehman
MUMBAI: Indian stock markets may fall by 10-15 percent in the short-term, but index levels between 12,500 and 13,000 can be viewed as buying opportunities in the coming year as inflation has peaked, Lehman Brothers said in a report.
The benchmark BSE index may trade between 14,000 and 19,685 in the next 12 months, Lehman said in the report dated Sept. 3 and released to the media on Friday.
Investors should consider buying shares in auto, media, consumer, telecom, real estate and pharma companies as well as banks, the research house said. Capital goods, non-ferrous metals and cement companies can be avoided, it added.
Double-digit inflation and subsequent monetary tightening by the central bank fuelled concerns of an economic slowdown and send the benchmark BSE index down 28.6 percent this year.
Inflation, which rose to 12.63 percent in August, was mostly driven by commodities and is likely to abate in the second half of current fiscal year on easing crude oil prices, Lehman said.
However, the central bank may continue with its tight monetary policy because of fiscal deficit concerns, Lehman said. With federal elections due early next year, the government is likely to boost spending, the research house added.
The government's expenses will likely balloon on higher subsidies to fertiliser companies, oil bonds, farm loan waivers and wage increases for government employees, said Lehman.
Interest rates to consumers and companies may remain high in the next three-six months and 10-year yields will likely stay firm in coming months, the research house added.
Corporate earnings have been affected by higher interest rates, rising raw material costs and high yields, but margins are likely to stabilise in coming quarters in a deflationary commodity environment, Lehman added.
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Arvind Parekh
+ 91 98432 32381
