In the absence of any positive trigger, the markets fell last week. The Sensex touched a high of 19,903 early in the week. As the week progressed, it recorded fresh lows. The index plunged to a low of 19,415, 488 points below the week's high. It ended at 19,485, a loss of 296 points.
Among Sensex-30 stocks, Sterlite slumped 9.6 per cent to Rs 101. Cipla and BHEL plunged about seven per cent each to Rs 381 and Rs 209, respectively. ONGC, NTPC, Tata Power, SBI, Hero MotoCorp, Coal India and Dr.Reddy's were the other major losers. TCS soared 5.7 per cent to Rs 1,423. HDFC and Sun Pharma were the other major gainers, rising about 3.5 per cent each.
According to the monthly Fibonacci charts, the Sensex gave a 'sell signal'. The bias for the remainder of the month is likely to remain bearish, as long as the BSE benchmark index sustains below 19,630. On the downside, the index could drop to 19,125-odd levels, or slide to 18,900-odd levels.
If the Sensex is able to break above 19,630 and sustain at that level, we could see a counter rally to 19,900-odd levels or 20,160-odd levels. According to the weekly Fibonacci charts, the Sensex is likely to seek support at 19,300-19,180 levels; on the upside, it could rally to 19,670-19,790.
Last week, the NSE Nifty moved in a range of 155 points. It touched a high of 6,069, before slipping to a low of 5,884. It ended the week at 5,904, a loss of 95 points.
For the Nifty, the weekly and monthly charts are clearly in favour of the bears. According to the weekly charts, the next major support for the index is 5,825-odd levels, below which we could see a slide to 5,530-odd levels.
Key momentum oscillators such as the moving average convergence-divergence, the relative strength index (RSI) and the Stochastic Slow have shown negative divergence on the weekly charts. Therefore, the bears are likely to have the upper hand, at least early in the week. The monthly charts, too, indicate significant support at 5,825-odd levels, below which we could see a significant fall to 5,550-odd levels.
However, select momentum oscillators such as the Stochastic Slow and the RSI are in oversold territory. In the last six months, on three occasions, the markets had bounced back sharply, after falling below the medium-term moving averages on the daily charts.
Once again, the benchmark indices closed below the medium-term moving average on the last two trading days. Given select momentum oscillators are in oversold territory, a sharp pull-back in the near term cannot be ruled out. In case of a pull-back, the Nifty would first have to stabilise at above 5,925, and then break above 5,960. Only a breakout above 5,960 could trigger a rally to 6,050-odd levels.
To sum up, the Nifty seems headed towards its key support at 5,825-odd levels. However, given the oversold conditions on the daily charts, a sharp pull-back, either from current levels or after a drop to 5,825-odd levels, cannot be ruled out. On the upside, in case the index sustains above 5,960, the Nifty could rally to 6,050.