Outlook choppy as overseas cues stay weak

The markets witnessed a weak trading pattern last week as the overseas cues from West Asia, North Africa and finally Japan knocked the wind out of the bulls’ sails.

The minor positive aspect of the week’s range was the fact that the lows made on Monday were defended by the bulls on Friday, establishing a swing low floor support in the immediate future.
The weekly combined exchange market breadth was negative as the figures were 9,587 : 11,774.

The capitalisation of the breadth on a commensurate basis was also negative as the figure were Rs21,194 crore : Rs45,745 crore. In terms of sectoral performance, the fall was the sharpest in the banking sector, followed by the technology and mid-cap sectors. The National Stock Exchange lost Rs62,084 crore in market capitalisation over the previous week.

Overseas investors were net buyers to the extent of Rs539.7 crore, but that still saw a weakness in the rupee vis-a-vis the US dollar, as it closed at the 45.06 levels (previous week 44.89 levels). The US markets saw weakness as geo political stresses fractured the upthrust and the Dow Jones Industrial Average closed at its lowest weekly close after week ended January 28, 2011.

The Nasdaq, too, logged a similar weak closing. The UK FTSE100 was relatively weaker compared with the US indices as it closed at its lowest weekly close after week ended December 17, 2010.  The overseas cues are weak and the domestic markets will have to rally on internal strengths this week.

Technically, the domestic markets are exhibiting an inside pattern on the weekly charts as the upthrust that commenced after establishing a swing low at the 5177 levels seems to be pausing for breath. The weekly range advocated for the Nifty between 5725 and 5350 has held as the Nifty stayed within these parameters during the week.

This week is likely to witness a range of 5650 on advances as long as the Nifty remains above the 5500 levels. On declines, the fall may test the 5300 levels as long as the Nifty stays below the 5460 levels. Traders must proceed with caution as the outlook ahead is choppy.   l