Comment

Last week saw a bullish ending as the bulls celebrated a Santa Claus rally in the markets. Market internals were positive as the combined exchange market weekly breadth was positive at 9459:6966.

The capitalisation of the breadth on a commensurate basis was also positive as the Rs 40,648 crore: Rs 25,528 crore. The Nifty gained Rs 1,91,758 crore in market capitalisation over the previous week. In terms of sectoral performance, banking stocks were at the forefront and lead the rally from Tuesday onwards.

FIIs were net investors to the tune of Rs 1,320.10 crore last week, including Rs 713.10 crore in primary issues. The rupee ended the week at the 46.76 levels vis-a-vis the dollar (previous week at 46.84 levels). The Dow Jones Industrial Average (DJIA) signed off the week at the highest levels for calendar 2009 on a closing basis.

The Nasdaq outperformed the DJIA by a wide margin in relative comparison, as was advocated last week. That augurs well for domestic technology stocks and barring unforeseen developments, trader activity is likely to extend in this sector. The UK FTSE - 100 outperformed the US markets as the recovery in Europe was more pronounced, backed by the trends in the euro vis-a-vis global currency basket spreads. As far as levels are concerned, I maintain my view that the inverse head and shoulder formation on the DJIA and S&P 500 remain in place and the target of 11000 on the DJIA in the coming 8-12 weeks holds good.
Technically, domestic markets are poised at the threshold of a breakout above a critical resistance level of the 5180 double top. A consistent trade above this level is needed if the current upthrust is to sustain itself.
The weekly range advocated last week between the 5270/4875 has held and this week is likely to witness a range of 5350 on advances and 5020 on declines, below which, 4800 maybe likely if the 5000 support is violated with forceful volumes. The bullish pivot for this week will be at the 5100 levels and the bearish pivot at the 5040 levels. With the year-end coinciding with the expiry of the December 2009 F&O series, volatility may increase. Traders should cut back exposure levels.