Indian stocks showed remarkable resilience last week, holding on to higher levels despite the sell-off in the rest of the global markets. The Sensex stormed the 22,000 peak and the Nifty moved past 6,500 in the early part of last week. But the momentum could not sustain and the indices spent the rest of the week sliding gently. We have another event-packed week ahead of us. Investors will have to shake themselves out of the bhaang-induced stupor of Holi and react to the outcome of the Crimea referendum on Tuesday morning.

The  Federal Open Market Committee meeting scheduled for Wednesday will also keep investors edgy as there is an expectation that the Fed will increase the QE taper by another $10 billion. Data releases from China will be scrutinised further. Both commodity and equity markets turned nervous last week on fears of increased debt defaults by Chinese companies, hurting the economic growth.

Foreign institutional investors, however, appear pleased with the improvement in the Indian economy. They have brought in close to $2 billion so far this month in equity.

Oscillators in the daily chart of both the Sensex and the Nifty are poised in the overbought region. But they are dipping slightly reflecting the easing of momentum over the past week. Weekly momentum indicators are moving sideways in the neutral region implying that the medium term trend has not turned too gung-ho as yet.

Sensex (21,809.8)

The Sensex tested the 22,000 level to record a fresh peak at 22,023. But it has lost ground since then.

The week ahead:  The Sensex has been in a gentle slide since last Tuesday. If the slide continues on Tuesday, the index can decline to 21,483 or 21,230 in the coming sessions. The short-term trend will reverse lower only on a close below 21,230. Subsequent support levels are 21,000 and 20,753.

Upper targets for the week are 22,018, 22,355 and 22,517.

Long-term view:  The Sensex has managed to hold above the ceiling at 21,500 for yet another week. It is time for us to revisit our long-term view. The Sensex is in a long-term correction since the peak of 21,108 formed in November 2010. The long-term range is 15,000 to 21,500. We are assuming that the second wave of this correction, the B wave, is currently in motion. Once this wave completes, the C will once again bring the Sensex lower.

The B wave can end anytime from these levels but it also has the potential to extend to 23,400. A strong B wave will mean that the next wave will halt at a higher level, around 20,000 or 18,000.

We are getting the first medium-term target at 22,500, if this rally holds above 21,500. Targets beyond 22,500 are 23,400 or even 23,835.

A strong close below 20,000 is needed to make the medium-term view negative. Key long-term support is a little lower, at 19,400.

Nifty (6,504.2)

The Nifty reversed from the intra-week peak of 6,562 to close lower. The doji formation in the weekly chart implies indecision. This means a break is possible in either direction.

The week ahead:   A rally from these levels can take the index to 6,562 and then 6,688. Short-term support levels are at 6,415 and 6,322. Short-term traders can hold their long position as long as the index trades above 6,322. Subsequent supports are 6,250 and 6,176.

Long-term trend:  The Nifty, too, is in a long-term corrective consolidation since November 2010. The range for the Nifty was between 4,500 and 6,300. Since this is a long-term move, a short-lived move above the upper ceiling cannot be construed as a break-out.

The second wave of this correction, the B wave is in motion since December 2011. This wave has the targets of 6,335 and 7,028. The wave can end anywhere between these two targets. The Nifty needs to now hold above 6,415 and more importantly, above 5,933 to retain the positive long-term view.

Global cues

There were deep declines in many of the global indices last week as commodity producers were hurt by concerns that China could be slowing down. CBOE VIX rose to 17.8 reflecting a rise in risk aversion.

There are talks of a slowdown in the Japanese economy and exports being just half of imports. Nikkei closed almost 6 per cent lower. The Dow lost almost 2 per cent last week with an evening star pattern in the weekly chart. The key short-term support for the index is at 15,375. If the index holds above this level, it can vacillate between 15,500 and 16,500 for a few more weeks.

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