Index Outlook

The ovation that greeted Sensex on recording a new high and scaling 15000 last week proves beyond doubt that it reigns supreme over the rest of the indices of the Indian stock markets. How else can one account for the rather incongruous festivities that greeted the event despite the fact that Nifty and a host of other broad market indices such as BSE 500, BSE 200 and the BSE Midcap Index have recorded new highs more than a month ago.
The pile-up in the derivatives segment is increasing every day. The open interest is near Rs 70,000 crore and we are just a week in to the July series. We can, however, draw solace from the fact that institutional players account for a chunk of this open interest.
There are traces that the Sensex is beginning to tire now. Despite, the Sensex recording new highs, the rate of change oscillator in the weekly chart is in the sell mode. The negative divergence in the same oscillator in the daily chart, too, points towards the need for greater momentum if the index has to go higher in the short-term.
If we consider the move from 12617, the Sensex has the targets of 14645 and then 15320. If we move down one degree and extrapolate the targets of the move from 13554, they are 14643 and then 15075. Since the first targets have already been achieved, the Sensex could halt in the region between 15075 and 15320. The 50-day moving average at 14295 should be the support that investors should watch.
For the week ahead, the Sensex can move higher to 15023, 15075 and then to 15219. There are a cluster of resistances between 15000 and 15100, which might not be easy to surmount this week. Short term investors and traders can, however, buy in dips as long as the index stays above 14617. The next support would be 14357.
Since we are again gearing to face the once-in-a-quarter, trend-defining event for the Indian stock markets, the Infy earnings announcement and guidance, next week; long-term investors are advised to stay off the markets for a week until the event has been assimilated.

Nifty (4384.8)
Nifty made a record high at 4411 last week. But the three dojis in the daily chart of the Nifty last week suitably reflect the tussle between the bulls and bears at this point. As explained last week, the zone between 4350 and 4400 is a potent resistance that can cause a medium term reversal. Though the Nifty can move higher to 4434 or even 4480 next week, we continue to advocate caution with long positions. However, fresh shorts are also not advised until there is a close below 4211. Supports for the week would be at 4293 and then at 4220. Global Cues
The Asian markets such as South Korea, Hong Kong, Indonesia, Taiwan, Thailand etc. surged to record highs. The only exception was the Shanghai Composite Index that recorded negative returns for the week.
Cotton futures on New York cotton exchange rising above a two year range to close at $62.73 should be a cause for concern for manufacturers of cotton textiles. Crude continues to go from strength to strength. It is confirmed that the current move is the third leg of the rally that commenced from the low of $49.9. The targets of this move are $70 and then $77. Nymex crude prices are now headed towards the second target.