Market Outlook by Experts


Technical Analyst Vijay Bhambwani

Technical Analyst Vijay Bhambwani says the coming week looks to be consolidated with mix trading. He says if Nifty breaks down from 3420 levels then it may touch 3380 levels. He advises that one should remain long.

Technical Analyst Vijay Bhambwani says the coming week is looks to be consolidated with mix trading. He says that he has a positive outlook if the Nifty remains above 3420 levels. He also mentions that if the Nifty breaks down from 3420 levels then there is a possibility that it may touch 3380 levels. He adds that there could be a bull market pressure but it will be like a routine phase of ups and downs but more or less the market may remain steady. He advises that one should remain long.

Anil Manghnani, Modern Shares & Stock Brokers

If the Sensex fails to close above 12016 this week, then we could expect a correction in the near term. One should only buy midcap stocks on deeper corrections in the midcap index.

The Sensex and Nifty are both close to their respective major resistance levels placed at 12016 & 3495. Thus one must wait for these levels to be crossed before taking fresh long positions.

As mentioned last week, the next targets for the Sensex and Nifty are placed at 12016 & 3495 respectively. Both the indices came very close to these targets before correcting slightly. One could expect some selling pressure before these levels on the up side are breached. I do believe that the next move after these resistance levels are crossed could be quite explosive and would take the indices to new highs. However, since the next move could be a significant one, I do feel one should wait for a confirmed break out where the Sensex closes above 12016 for 2-3 trading sessions before one builds fresh long positions. I would rather you buy higher on a confirmed break out than now where you are not sure whether we would first see a correction or a continuation of this rally.

If the Sensex fails to close above 12016 this week, then we could expect a correction in the near term. The immediate supports for the Sensex are placed at 11721-11559-11523-11240 and for the Nifty the supports are placed at 3420-3375-3358-3275.

The midcap index is still in a corrective rally and thus should face stiff resistance at a level of 4567. One should use this rally up to 4567 to exit positions. One should only buy midcap stocks on deeper corrections in the midcap index.


Hitendra Vasudeo

For traders, trading will have to be undertaken with a well-defined stop loss and with well-defined risk per trade before executing any trade as the market can shock at times. Traders can continue to trade long till the weekly trend is up. Investors can look out to book profits and exit long positions as the market tries to hit the upper range of 12100+.

Higher levels prone to resistance

The Sensex shied away form the 12000-mark last week. The Sensex opened the week at 11824.49, attained a low at 11815.43 and moved up to a high of 11983.48 to finally close the week at 11918.65 and thereby showed a net rise of 140 points on a week-to-week basis.

The Sensex is now in the Flat pattern range. The price implication of Flat pattern is 75% to 100% of the preceding move, which in our case, is the falling move from 12671 to 8799. The 75%, 87.5% and 100% of the fall from 12671 to 8799 is placed at 11700, 12187 and 12671. We are above 11700 and knocking on the doors of 12000. In spite of some attempts to touch 12000 last week, the Sensex shied away from it. In anticipation and market consensus that 12000 plus will be difficult to sustain, we witnessed sustained profit booking at higher levels and change of hands last week. In short, we can call the band of 11700-12671 as a broad strong resistance zone. Long-term investors, who are willing to miss some upside moves, can look at the higher range of 12187-12671 as the range to book profits.

Support will be at 11815-11778 and 11651-11619. These support levels are the gaps on weekly and daily charts respectively.

The weekly trend is up since the weekly closing on 28/07/06 of 10680. Since this weekly buy signal, the Sensex has moved to a high of 11983. Traders who were able to follow our weekly update and initiated Nifty trades based on the Sensex movements as recommended would have benefited. The overall trend is the same. Therefore, an uptrend on the Sensex will also mean an uptrend for the Nifty. The difference is in price movements and the discount/premium situation will prevail. But the bottom-line is that the trend is up. Therefore, whatever the situation on the futures premium and discount situation, following the trend is more important.

As the Sensex gets sluggish at higher levels the broad market stocks have done well last week. The broad markets are doing the catching up act against the Sensex.


Let us look at the momentum-based parameters along with the Bollinger Bands. On Bollinger Bands, let us take the 21-day moving average and 2 standard deviation of the average. Along with the Bollinger Bands use ADX parameter to define the momentum. The Nifty gave a breakout and close above 3210 on 09/08/06 and since then the ADX is moving up and is above 20 which indicate that the rise was with momentum and the direction of the rise was up. Therefore, traders trading long had the opportunity to profit on long trades.

Overall on the Sensex, we found the ADX was moving up since the breakout and close above 10940. The Bollinger Bands are moving up but the width of the Upper and Lower Band has got reduced, which means that sooner or later we are going to have wide moves. The wide and strong moves will come in the direction of the price movement. If the support and stop loss of 3377 (NIFTY) and 11550 (SENSEX) get violated, then expect the bandwidth to widen and the fall can be sharper.

On a broader view, therefore, book profits and exit on spurt to higher levels. The Sensex 2 standard deviation upper band is placed at 12056 and is moving up by 30 points every day. The lower band is moving up fast by 65 points and the average is moving up by 30 points. The rising speed of the upper band is slower. Therefore, at higher levels investors need to be cautious.

Strategy for the Week

For traders, trading will have to be undertaken with a well-defined stop loss and with well-defined risk per trade before executing any trade as the market, though showing signs of an upward trend, can shock at times. Therefore, in order not to get caught off-guard by erratic market moves, money management is the key to regular success irrespective of a few failures from the trading point of view. Traders can continue to trade long till the weekly trend is up. Investors can look out to book profits and exit long positions as the market tries to hit the upper range of 12100+.





Amendments done by SEBI

Sebi has amended the fund regulations through its notification on August 3. The notification brings about two key changes. It lays the ground rule for launching 'capital protection-oriented scheme'. The other change is that regulator has hiked its fees for mutual funds.

The 'capital protection oriented schemes' will only try to protect the capital of the investors. These funds can only be closed-end funds and the asset management company will not repurchase units of capital protection-oriented scheme before end of the maturity period. Also these funds will have to be compulsorily rated by a credit rating agency for their ability to protect capital.

The other change is the hike in minimum fee for the fund houses filing offer document for the new fund offers (NFOs). They will now have to pay 0.03 per cent of the total amount raised subject to a minimum of Rs 1 lakh. This means that if a new scheme raises Rs 100 crore, it will have to give Rs 3 lakh as fee to Sebi. The application fee for launching new mutual fund scheme has been hiked from Rs 25,000 to Rs 1 lakh.

Besides these, the regulator has also doubled the registration fees for setting up new asset management company to Rs 50 lakh. The fund houses will now have to pay an annual fee of Rs 2.5 lakh. This means more revenue for the regulator.

Hike in fee is unlikely to have any significant bearing for most investors. However, this can have noticeable impact on low yielding fund categories like the cash, short-term bond funds and short duration FMPs.

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How are your investments performing compared with others in the same category? It is important as for example, a 15% growth in your fund may look great, but not if the average returns given by other funds in the same category is 25 percent. However, too much emphasis shouldn’t be put on the short-term performance.

Market Outlook By Experts


Anil Manghnani, Modern Shares and Stock Borkers

The Sensex has now closed beyond the 76% retracement level of 11753 and thus is likely to test the next levels of 11898 & 12016. The Sensex has closed the week above a major resistance range placed at 11735-11753 and thus should continue its upward journey to reach the next targets placed at 11898-12016. Though the Sensex is rising it is doing so with reduced volumes and this is a cause of concern. The Sensex should move to the next targets of 11898-12016 and then give into a correction. By closing beyond the 76% retracement level of 11753, the Sensex has exhibited strength and thus suggests that in the next fall the Sensex would make a higher bottom at about 10650-10600 levels. I would advise booking profits in the on going rally to enter at a lower range of 11410-11060 for trading buys and in the range of 10650-9950 for investment buys. The midcap index is still in a corrective rally and thus should face stiff resistance at a level of 4567. One should use this rally from 4326 upto 4567 to exit positions. One should only buy midcap stocks on deeper corrections in the midcap index. Although the Midcap Index closed higher this week, one clearly witnessed corrections in many midcap stocks. This is a clear indicator that most midcap stocks are in a corrective rally and are already showing early signs of fatigue. Thus my advice would be to continue exiting these stocks in every rally. Many of the pharma stocks have shown good movement in the past week with both price and volume break out. Thus one should focus on this sector in the near term as this sector could outperform the Sensex in the coming weeks.

Ashwani Gujral, Technical Analyst

Market gets ready to cross 3450 I had mentioned last time that the market is showing bull market tendencies. Now, please note that does not mean I am talking about new highs coming. I am talking about market action. Bull market action is one where ever consolidating days end positive. Corrections, when they come are either running corrections, or just one or two day minor dips, before the market recovers sharply. This market is showing all these tendencies. I think at 3000, the market was much more shaky and non trending than it is now. So today's market is a better market to be trading in, as this market is seeing good institutional flows and a strong trend to back. On chartical basis, the market has held 3400 on the Nifty very well, we believe once 3450 is taken out, the market should head to 3550-60. I can see consciously, most market gurus, are avoiding long range targets. The reason for that is the retail trader gets complacent when such targets are given. I think its more useful to plan the next 100 points on the Nifty at a time, rather than waiting on larger targets and trying to ride reactions, but that is my view as a swing trader. Sectors which look bullish at the moment are IT, autos, cement, banks. Sectors to avoid are sugar and metals. Some good breakouts I have seen over the week are Bajaj Auto, Siemens, ICICI Bank, HDFC Bank, Glaxo Smithkline, IPCL, Tata Motors, Cipla, Divi's Lab, Maruti. Overall I believe that the next week will be positive with a lot of strength in many heavyweights.

Jagdish Malkani, Member NSE

Jagdish Malkani, Member NSE says that the market has ended on a positive note today and we will carry the momentum into the next week by opening firm. Temporarily he sees the markets to be on an upswing, but maintains that we are likely to see atleast a 10% correction in the indices before the end of the year. He believes that the Nifty can touch the 3,500 levels, while the Sensex should touch 12,200 before correcting On the sectoral front, he likes the cement sector and advices buying in them. He believes that the rally in the indices will be lead by the heavyweights like RIL, ITC and Infosys Technologies. He advices staying away from the media, sugar and tea stocks, though they have seen good buying today.

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