The Indian markets sank lower on Wednesday after opening with an upward gap. The miscreant this time was profit warning and lower than expected results from the TMT bellwether stock, Infosys Technologies Limited. The ensuing panic saw the sensex touching a low of 3298 before ending the day at 3325. The nifty closed at 1066.80. Volumes continued to be very low while the breadth was largely negative.

The inter day trading patterns are not very encouraging. Significant recovery today is not likely as today is the last trading day of the week. The short term could continue to be volatile. An optimistic scenario for the day is a sideways movement between 3300 and 3500. In case yesterday’s low is breached, the sensex could find support from 3244, 3224 or 3167.

The indicators are getting pretty oversold in the daily as well as the weekly charts. A pull back is quite likely very shortly. One interesting indicator is the 14-week RSI in the sensex chart that indicates that the market is near an intermediate term bottom. The important support zone now is between 3200 to 3300. In case this level is breached, the sensex can seek support in the 3000 to 3050 areas.

We might see the sensex bottoming out today. But we do not have any reversal signal yet. The most important thing at this juncture is to avoid panic. Sanity is likely to be restored once the market reopens on Monday morning. The risk averse investors can step back and wait till the sensex rallies above 3500 again before stepping in.

TODAY’S TRADING DAY

The NASDAQ’s recovery yesterday can cheer our markets a little though the performance of infy is a cause for worry. If the carnage in the TMT continues, the sensex can fall to 3298, 3244 or 3224. Target beyond 3200 is 3167.

Resistance for the day will be at 3341, 3394 and then 3428. We need a rally above 3500 before the short term down trend can reverse.

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