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Sensex slide may halt around 3000, say analysts

The bellwether 30-share BSE Sensex's plunge to a 27-month low last week took its oscillators deep into oversold territory, improving prospects for a recovery, technicals analysts said on Monday.

The Bombay equity markets closed on Thursday at 3,183.77 points, after losing 392.33 points or 11 per cent last week. The 14-period relative strength index for the daily, weekly and monthly charts were all below the 30 per cent oversold levels.

The stockmarket was closed last Friday for Good Friday.

"The descending triangle pattern suggests that this slide could terminate at around 3000 points," said Vidur Pendharkar, an independent technical analyst based in Bombay.

The target is arrived at by deducting the height of the triangle to the point at which multiple bottoms were formed.

The index was trading at 3,222.16 by mid-afternoon on Monday.

Mind the gap

Chartists said the index had created a "gap" on Thursday in the daily bar chart, as the day's high fell nearly 34 points short of the previous day's low.

"This could be interpreted as an exhaustion gap or as a runaway gap," said New Delhi-based independent analyst Devangshu Datta.

An exhaustion gap signals the end of a slide, which in this case could see consolidation in the region of 3,120-3,320 points, Datta said.

A runaway gap on the other hand means a further fall is on the cards and that a halfway mark has been reached.

If we treat this as a runaway gap, the downside is limited to 3,050 points, Datta said.

Monday's close could help determine the nature of this gap, analysts said.

"If Monday's close is above the gap, we could see the slide halting," said Baldev Chawla, chartist at Motilal Oswal Securities.

HLL nearing bottom

Hindustan Lever Ltd, which fell sharply on Monday, was close to a technical bottom, Pendharkar said.

HLL , with accounts for over 18 per cent of the Sensex, fell as much as 12.5 per cent to Rs 184.50.

"The rising channel formed by connecting the lows struck in November and January has a width of Rs 40 movement," Pendharkar said.

"If we apply that to the recent resistance at Rs 217, we get a target of Rs 187," he said.

Infosys Technologies, India's second-biggest software company by market valuation, had formed a gap on Thursday, but analysts said this did not have reversal implications.

"To cover the gap will require a Rs 400 rally...a touch difficult given the circumstances," said Chawal of Motilal Oswal Securities.

On Monday afternoon the stock was trading 5 per cent higher at Rs 2,995, but its 14-day RSI was still in the oversold zone at around 21 per cent.

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