Comment

The last week saw the markets climb the wall of worry to end at the highest closing for the calendar 2009. The traded turnover was higher than the previous week and the combined exchange weekly advance decline ratio was marginally negative at 10,029:10,363.

That is a function of retail scepticism and unwinding at higher levels. The capitalisation of the breadth was positive as the commensurate figures were Rs 68,138 crore:Rs 56,577 crore. The NSE gained Rs 1,01,584 crore in market cap during the week. Of the entire turnover initiated, only 19% was transacted on positive market internal days, suggesting a lack of conviction within the retail camp. The markets appeared to be changing gears as strong hands absorbed stocks sold by weaker hands.

The overseas investors were optimistic and invested Rs 3,046.90 crore during the last week, thereby boosting the rupee to close the week at 48.48 levels vis-a-vis the US dollar (previous week 48.89).

The overseas indices have tested new 2009 highs and the technology heavy Nasdaq outperformed the old economy Dow Jones Industrial Average by almost a 100% weekly gain. In terms of relative outperformance, the UK FTSE 100 outpaced Dow Jones by a wide margin. As advocated by me earlier, Dow Jones has established and activated an inverse head-and-shoulder formation that has bullish implications.

Technically speaking, the domestic indices are in bullish hands and the weekly range specified for the Nifty between 4850 and 4475 was overcome on the upsides as the Nifty scaled the 4889 highs. The 4675 bullish pivot proved to be an accurate level as the bulls managed to keep the Nifty spot above this threshold for most part of the week.

This week is likely to witness a range of 5025 on advances and 4700 on declines. Should the 4700 level be violated with violent force of volumes and open interest expansion, the 4550 level may be tested.

As of now that appears to be a low-probability event. The bullish weekly pivot will be at the 4810 levels and the bearish pivot at the 4760 levels. The bias remains positive and longs may be maintained with a stop loss at the 4700 mark on a closing basis.