Sensex awaits earnings kick-off :: Business Line

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As investors preferred to remain cautious in the holiday-shortened week, the Reserve Bank of India (RBI) decided to keep the key rates unchanged in the monetary policy announced last week.

Though this wasn’t out of sync with market expectations, broader indices went through a bout of volatility during the session.

The mid- and small-cap stocks experienced a relief rally and the respective indices closed the week on a positive note.

Indices representing rate-sensitive sectors such as BSE Bankex and Realty fell 1.8 per cent and 3.5 per cent respectively for the week.

But the IT Index surged 3.6 per cent recording a new high on the back of stronger dollar to support margins. Quite a few IT stocks also registered new highs for the week.

US markets found their base and rallied intra-week, trimming recent losses in the Dow and S&P 500 index, as the US jobless rate fell to a six-year low of 5.9 per cent in September.

It was a better-than-forecast payrolls report; an expansion in service industries also strengthened the investors’ confidence. However, both the US and European indices closed the week in negative zone.

Domestic markets will remain closed on Monday on account of Bakrid; the opening on Tuesday could set the tone for the week. The July-September earnings reports will kick off with Infosys scheduled to report its quarterly results on October 10.

Foreign investors have been wary through the week, remaining net sellers for much of last week. Their action is also a factor to watch out for in the ensuing week.

Oscillators in the daily chart are sloping down after a minor rise indicating that the short-term trend could weaken from here.

The weekly oscillators extended the decline. The negative divergence in this chart shows possibility of the medium-term outlook turning uncertain too.

The weekly price rate of change oscillator is just above the zero line. A fall to negative terrain will indicate short term bearishness.

Sensex (26,567.9)

The Sensex was choppy as it zipped between the intra-week high of 26,851.3 and low of 26,481.3.

The week ahead: The index has been moving sideways over the past one month. If it fails to rally above 26,887, it will signify that the Sensex can decline to 26,220 or 26,032 in the week ahead.

To alter the short-term trend, the index needs to decline below 25,233. However, a strong surge above 26,887 can take the index higher to 27,354 and 27,531.

Medium-term trend: As long as the index continues to hold above the key support level of 26,000, the view remains positive. The next key medium-term support will be at 24,500. On the upside, a decisive close beyond 27,400 can take the index to 28,400 in the medium term.

Nifty (7,945.5)

The Nifty hovered between the intra-week levels of 7,923 and 8,030.9 and closed 0.29 per cent lower for the last week.

The week ahead: The Nifty is hovering just above its 50-day moving average line at about 7,900.

The inability to rally above 8,032 once again will be the cue for traders to initiate short positions with a stop-loss at 8,050 levels.

Targets are 7,790 and 7,718. A conclusive break of 7,718 will indicate that the index can trend downwards to 7,540 levels. Nevertheless, a strong rally above 8,032 can push the index higher to 8,180 and 8,236 in the short term.

Medium-term trend: As long as the Nifty holds above 7,000, the medium-term outlook stays positive. Key support is placed at 7,800.

Global cues

The global markets witnessed a sell-off during the initial part of the week. However, only the US indices recovered sharply on Friday. The European and Japanese markets saw steep declines, closing below the key support levels. This emits short-term bearish signals.

CBOE volatility index closed on a flat note in the midst of volatility. The Dow recouped most of the intra-week loss on Friday to close marginally above the key support at 17,000 levels.

Immediate supports are at 16,800 and 16,650. Resistances are at 17,150 and 17,350. We reiterate that a fall below 16,300 will weaken the short-term uptrend.

The Do0llar Index extended its uptrend by gaining 1.3 per cent last week. Now, it is headed towards the resistance at 89. Supports are at 86 and 85 levels.