It was a closely fought contest between the bulls and bears in Indian stock market last week. The bears put their might behind preventing the Sensex from shooting past the 18,000-mark and the Nifty above 5,400. The bulls were more concerned with maintaining a firm foothold and not letting the indices slip. This tiff resulted in the indices moving in a very narrow band through the week.

Most global equity markets, including ours have had a strong run since the beginning of this calendar. The question now preying on investors' mind is how much further will this rally go? Signs of nervousness and diminishing risk appetite were reflected with the dollar index reversing higher and the steep spike in the CBOE VIX, also called the investors' fear gauge.

Cash segment turnover was unusually high on NSE last week, among the highest recorded in recent months. Derivative volumes were also strong, especially on Friday. Open interest has moved up to Rs 1, 40,000 crore.

Despite the dull sideways move in the front-line indices, individual stocks witnessed brisk action based on quarterly earnings and other announcements. Macro economic readings on GDP, trade deficit and industrial production helped to temper the optimistic mood in the market. With the Union Budget just a month away, prognosis on the likely provisions in this document will begin dominating investor conversations.

Both the indices moved close to the ceiling of their medium-term trading range and are tantalizingly poised just below. As explained last week, the medium-term range for the Sensex is between 15,500 and 18,000 while the range for the Nifty is between 4,600 and 5,400.

Rally above current levels will make the medium-term trend positive and pave the way for rise to 18,826 in the Sensex and 5,648 in the Nifty. But reversal below 18,000 in the Sensex will mean that the index can stay volatile between 15,500 and 18,000 for the rest of this year.

The week ahead should give us clues about the medium-term intention of the indices. The fact that both the Sensex and the Nifty are holding firm above the 200-day moving average is a positive. Weekly oscillators are also signalling a reversal in medium-term trend. But daily oscillators are sagging after last week's sideways move. Signs of weakness in the charts of global benchmarks also imply that though the indices could take a step higher, some consolidation is likely in the upcoming weeks.

Sensex (17,748.7)

The weekly candlestick chart of the Sensex is very pleasing to the eye with five consecutive green candlesticks topped by a doji. There are also no signs of weakness in the short term. The need for caution arises from the fact that the index is nearing the resistance band between 18,000 and 18,200.

Our preferred view is that the index moves a little further to 18,008 or 18,255 before declining. The correction could halt at 17,221 or 17,000. If the index manages to hold above these levels, it will mean that the uptrend will continue after a hiatus, maybe to take the index higher to 18,826 by Budget.

This positive short-term view will be altered if the index declines below 17,000. Fall to 16,600 or 16,200 will then be possible. The Sensex needs to close below 16,200 to signal that it is readying for a deep dive.

Nifty (5,381.6)

There is no sign of short-term weakness in the Nifty either and the up-move from the January 2 trough continues to be strong. The index could attempt to move higher to 5,465 or 5,531 in the days ahead before giving up some gains. If it continues moving higher, the medium-term target at 5,648 will come in to play.

But it is quite likely that the index eases a little in the days ahead to 5,226 or 5,152. Traders can buy on declines as long as it trades above the second support.

Sideways move in the band between 5,150 and 5,500 can be the halt before the index attempts to move to the next medium-term target at 5,648.

Short-term outlook will however deteriorate on a close below 5,150. Next supports are 5,050 and 4,950.

Medium-term view will turn negative on close below 4,950.

Global indices

Global benchmarks moved higher in the first part of the week but they lost ground towards we

ekend. Events in Greece initially favoured the bulls as a resolution to its debt troubles seemed to be in place.

But European Finance Ministers cast aspersions on the adequacy of austerity measures causing stocks to tumble on Friday.

DJ Euro STOXX 50 closed slightly lower after four consecutive positive weekly closes.

That equity markets have had a strong run since the beginning of this year and are in need of a little cooling also seemed to be preying on investors' mind.

The CBOE volatility index that reflects investor sentiments started edging higher right from the outset of the week. It jumped above 20 as doubts on Greece resurfaced.

The Dow hit the intra-week peak of 12,924 and then turned jittery. As explained last week, this index needs to record a strong move above the 13,000 mark soon.

Else there is the possibility of it reversing lower to 11,000 or 10,400 in the ensuing months.

Immediate supports are 12,286 and 12,000.

Asian benchmarks continued their strong run with Philippines Composite Index, Seoul Composite Index, Taiwan Weighted Index, Straits Times Index and so on recording positive closes.

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