Will it, won't it? Nifty on the cusp of a pre-budget rally

How are the stock markets poised, technically speaking?

Psychologically speaking, a close above the 5,000 level was important for the NSE Nifty, but technical analysts were looking keenly for a closure above the 5,150-5,200 level.

They got it on Friday, when the Nifty closed at 5,204.70, just above the 5,200 mark.

Rohit Srivastava, Fund Manager for Sharekhan ProTech PMS, is of the view that 5,280 is the next key level to watch out for, as this is where a falling Nifty is expected to meet the downward channel (see chart below). A breakout above this channel can be very sharp, which can take the Nifty to 5,675 levels.Above this level, the Nifty has the potential to test the previous high of 6,335.90.

The market has gone through a 14-month downward cycle, adds Srivastava, and so the rally could endure. He is, however, of the opinion that the market is in a bearish phase and these rallies are essentially corrective in nature. This rally has the potential of extending till March 2012.

Bishnu Basyal, technical analyst with Master Trust Capital, says that we are near a temporary top. A healthy 200 points correction (downward move) is due anytime now. Depending on the strength of the correction, he will be able to guess the next move in the market.

In case the fall is steep, he does not rule out the possibility of the Nifty falling below the previous low of 4,531. This can take the market down to 4,000 levels. In case the fall is slow and shallow, Bishnu believes that the market can rise to 5,400 levels and then to 6,000 levels.

Among the sectors that he favours are automobiles, banking and infrastructure.

With most of the key results out of the way, except SBI, analysts are getting more bullish on the market. A pre-budget rally laden with high expectations can take the market higher.