It was a suspenseful week for the Indian stock markets as the two benchmarks — the Sensex and the Nifty — did a tantalizing jig, an arm’s reach away from their life-time highs. The overwhelming pessimism in the market made the Sensex wobble nervously every time it neared the 21,000-mark and the Nifty too failed to get past 6,300.

The stage is now set for a big week, with the RBI’s monetary policy meeting, US Federal Open Market Committee meeting, F&O expiry and a Muhurat trading session thrown in. The short-term trajectory of the market will be decided by the RBI Governor Raghuram Rajan’s next move. Continuation of the policy to bring down the Marginal Standing Facility ratewhile hiking the repo rate, will result in status quo. But if the Governor chooses to do something different this time, then the indices can go to a new high or crash; depending on the nature of the surprise.

Global markets are also in a festive mood with many benchmarks, including the S&P 500, at a new life-time high. Ben Bernanke also needs to do his bit and maintain an enigmatic silence on the QE tapering to enable the rally to continue. Any hint at a new schedule for winding down the stimulus programme, can result in a fresh bout of turbulence.

FIIs are pouring in money into the Indian market. This is part of a global flow of funds into emerging markets. According to EPFR Global, flows into emerging market equity funds jumped to a 37-week high for the week ending October 23.

This was due to strong flows in to emerging Asian country funds. The BRIC theme is, however, yet to find favour and the BRIC funds have now posted outflows in 137 of the 146 weeks since the beginning of 2011.

Oscillators on the daily chart are declining in line with the short-term weakness perceived last week. Negative divergence in the daily price rate of change oscillator reflects lack of short-term momentum.

Weekly oscillators are attempting to cut higher from the bearish zone into bullish territory. But this has not yet been accomplished.

These oscillators have been meandering sideways since April 2013, following the range-bound move in the indices during this period.

Sensex (20,683.5)

The Sensex was in a gentle slide through last week, but for the flurry of excitement on Thursday, when it crossed 21,000 briefly. The short-term trend deciding level is 20,371. Investors can buy during declines as long as the index trades above this level. If this support holds, the Sensex can attempt to move higher to 21,299, 21,467 or 22,146 in the sessions ahead.

The short-term outlook will turn negative if the index closes below 20,000.

The medium-term outlook for the index turned positive when the Sensex reversed from the low of 17,449. Extrapolation of this move gives us the targets of 21,299 and 22,537. We will stick to these targets unless the index closes below 19,960.

The Nifty ( 6,144.9) too, recorded the intra-week high of 6,252 and then went on to lose 44 points during the week. Key support for the week is at 6,045.

Investors can continue to buy for the short term as long as the index trades above this level.

Subsequent supports are at 5,980 and 5,917. The short-term trend will reverse lower only if the index closes below 5,917.

If the Nifty manages to hold above 6,044 next week, it will be able to rally to 6,252, 6,338 or 6,385 in the days ahead.

The medium-term trend in the Nifty will not be threatened unless the index goes on to close below 5,800.

Global cues

Global markets are also in an indomitable mood. The S&P 500, the DAX, KLSE Composite Index recorded new life-time highs last week and the Nasdaq is at a level last recorded in 2000.

The dollar index recorded a low of 79.1 on Friday.

Weakness in this index denotes higher risk-appetite and the possibility of increased fund flows to riskier asset classes, such as emerging market equities.

The Dow managed to close 181 points higher last week, around 200 points short of a new life-time peak. The sideways move in the narrow band of 14,500 and 15,500 will be construed as positive for the index.

It can break out to the medium-term target of 16,600, if the support at 14,500 holds.

> lokeshwarri.sk@thehindu.co.in