Pullback rally possible if Budget gets a thumbs-up

Last week witnessed a higher-than-usual volatility as geopolitical tensions, major news trigger (Budget) and derivatives series expiry converged to hit sentiments concurrently.

The combined exchange weekly advance-decline ratio was negative as the figures were 7,405:12,573.

The capitalisation of the same was also negative as the commensurate figures were Rs26,912 crore : Rs56,278 crore.

The NSE lost Rs186,151 crore in capitalisation on a week-on-week basis.
In terms of sectoral performance, the decline was led by the mid-cap sector, followed by technology and banking stocks.

Overseas investors sold Rs2,209.2 crore worth of Indian paper and that saw the rupee close at the 45.25 levels vis-a-vis the US dollar (previous week 45.19 levels). The US markets remained edgy due to the worsening situation in Libya.

The Dow Jones Industrial Average and Nasdaq Composite lost weights, though the Nasdaq appears relatively weaker.

The UK FTSE100 shed weight but relatively less than the US peers.
Overseas cues are weak and the domestic markets will have to display sizeable strength to outperform its overseas peers as our markets have been lagging external markets.

Technically, the domestic markets have not yet breached the swing reversal low of 5179 that was seen in the recent past.

The medium-term bullish trendline support also remains in place and therefore the pullback may still extend upwards, subject to broad-based acceptance of the budget by the market men.

The weekly range advocated between the 5750 and 5175 levels on the Nifty has held as the benchmark traded between these parameters.

This week is likely to see a range of 5700 on the upside as long as the bulls manage to keep the Nifty above the 5400 levels on a sustained closing basis.
The declines may test the 5050 levels as long as the bears manage to keep the Nifty below the 5350 bearish pivot.

This week is loaded with at least one major news event that is likely to cause high volatility and, therefore, traders are advised to go light on their exposure to protect their risk capital from undue shocks.