Don't press panic button
We have an action-packed week ahead with the Reserve Bank of India set to announce its monetary policy review statement on Tuesday and the expiry of January series in derivatives scheduled on Thursday. Volumes recorded last week indicate that investors and traders have withdrawn to the fence to wait out this bumpy period. FIIs are once more in the exit mode, having sold close to $1 billion in January.
A perusal of the monthly charts shows that the medium-term trend in the Sensex remains sideways between 8000 and 11000. There would be no need to press the panic buttons until there is a firm close below 8000.
The moot question is, where will the index bottom? The first target as discussed in our yearly outlook lies around 8000. Only if this level is breached strongly will the next target come in to play
The decline and close below 9000 has made the short-term view overtly negative. Immediate targets for the down-move from 10469 peak are 8497, 7934 and then 7022. In other words, the area around 8500 and 8000 are strong supports from where a reversal is possible. Key resistance for the week would be at 9400 where the 50-day simple moving average is also positioned. The medium-term view can be salvaged on a rally past 9800.
Text & Images: Business Line