It was a plucky show by the Sensex and the Nifty last week, managing to close in the green in all the four sessions and ending the week at a new life-time high. The Sensex has gone past the hump at 26,500 but the Nifty is yet to sail past 8,000.

But since that level is less than 50 points away, it might be achieved early next week. Especially if the market opens on a gung-ho note due to the surprisingly positive 5.7 per cent GDP growth in the June quarter. Since the last time growth was above 5 per cent in 2012, there is reason to hope that things are really improving with the investment cycle and the economy.

It will be interesting to see what the ‘8,000’ number does to the market’s psyche — whether it makes investors go on a buying spree or brings on a deluge of selling.

The domestic market has the added support of a very upbeat global environment. Investors elsewhere are also in a Utopian state with the S&P 500 moving above the 2,000-mark last week and the Dow too closing at a new life-time high.

It has been a fairytale existence for the Sensex and the Nifty so far this year. After a very mild decline in January, the indices have closed with gains in all the other months. The year-to-date gains stand at 26 per cent for the Sensex and the Nifty and at 29 per cent return of the broad-based CNX 500 index.

There is no denying that a large part of it is due to the Modi effect. The three months of Modi regime has resulted in the front-line indices gaining around 8 per cent. This means that while the expectation of a stable Government made indices surge in the run-up to the elections, investors have turned more circumspect thereafter.

The two benchmarks have been forming a running correction since May 26. In this pattern, indices move sideways with an upward tilt. This implies that despite profit booking at higher levels, sustained buying interest is not allowing the index to go into a deep correction. This has bullish connotations.

The Supreme Court was in an over-drive last week, declaring the allocation of coal-blocks in the past two decades illegal, disallowing Tata Power and Adani Power to charge higher tariffs for power produced in Mundra, and asking DLF to pay the fine imposed by the CCI. The stocks of companies that bore the brunt of the Supreme Court’s judgements tumbled lower. But the indices holding their heads above the water despite this implies that there could be some fireworks in the offing.

Daily oscillators have risen above the neutral zone into the positive territory, indicating that the short-term trend is up. The weekly relative strength index moving higher after dipping slightly in the overbought zone means the medium-term trend also continues to be strong.

Sensex (26,638.1)

The weekly close above 26,500 in the Sensex is a victory for the bulls. If this level sustains for a couple of weeks, the Sensex will be zipping towards the 27,000 level soon.

The week ahead: The Sensex has ended near the weekly high. Investors need to watch their step in the early part of the week. A close below 26,300 will mean the short-term trend has reversed and the index is heading towards 26,121, 25,794 or 25,241. The short-term trend will reverse only on a close below 25,241.

But if the index heads higher next week, it can then move to 27,117 and then 27,427.

Medium-term trend: The strength of the medium-term trend will be tested next week. We stay with the view that the index faces resistance in the band between 26,830 and 27,000. Reversal from this zone can pull the index towards 25,000 again.

Nifty (7,954.3)

The Nifty too put up a very resilient show last week, managing a new closing high.

The week ahead: The daily chart of the Nifty is looking very bullish. The extremely shallow correction witnessed over the past eight sessions implies the index intends to break higher soon.

Immediate upper targets are 8,007 and 8,098. Investors should watch out for hiccups around the 8,000 level. Reversal from there can cause a decline to 7,786, 7,700 and 7,540.

Short-term traders can hold their long positions as long as the index trades above 7,786. The short-term trend will reverse lower only on a fall below 7,540.

Medium-term trend: The medium-term trend in the index stays positive. This view will reverse only on a close below 7,400. Medium-term targets if the Nifty gets past 8,000 remain at 8,110 and 8,208.

Global cues

Most global indices closed with gains last week. The exception was the Russian RTSI, which suffered due to the sanctions imposed on the country.

The Dow hit a high of 17,153 before ending flat. Investors there appear a little tentative as the index moves to new highs. A sharp break beyond 17,200 is needed to set the index on a fresh up-move.

The movement of the dollar needs to be keenly watched as it will deter mine the flows into emerging markets. The dollar index is at a key resistance at 82.7. Close above this level will take the index to 85.

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