>EAGLE EYE ON 09/10/09 (SHAREKHAN)

Bonus party spoiled

Markets on Oct 08, 2009: Negative divergence
Nifty opened in green with positive expectation on Reliance Industries, which recommended a 1:1 bonus share yesterday, but almost gave up all its gains at the end of the session. Nifty has been trading in the range of 4900- 5150, where 4900-mark is quite crucial as the index has taken this support two times earlier. The up-move in the index is not supported by momentum indicators, which continue to remain in sell mode and such a negative divergence acts as a hurdle for markets to move higher. Also, Nifty is unable to cross the swing high of 5110 made on last Thursday, which still remains a strong resistance on the higher side. So, till this range is broken on either side we may see a sideways movement. We maintain our bias down as the trend is heading lower.

On the daily chart, Nifty is trading above its 20 daily moving average (DMA) and 40DMA at 4947 and 4765 respectively, which are crucial supports in the near term. The momentum indicator (KST) had given negative crossover and is above the zero line. The market breadth was negative with 579 advances and 690 declines on the NSE and 1,280 advances and 1,596 declines on the BSE.

On the hourly chart, Nifty is trading around its 20 hourly moving average (HMA) and 40HMA at 5005 and 5027 respectively, which are now resistances in the short term. The momentum indicator (KST) has given negative crossover and is trading below the zero line.

Nifty and Sensex closed marginally in green gaining 17 and 37 points respectively. Of the 30 Stocks of Sensex, Bharti Airtel (down 6.61%) and Reliance Communications (down 6.01%) and Tata Consultancy Services (down 3.36%) were the top losers while ITC (up 3.52%), Cipla (up 4.35%) and Tata Motors (up 5.35%) were the top gainers.

To see full report: EAGLE EYE 09/10/09