It was a mixed week for the market, with hopes raised by strong corporate results, prospects of a good monsoon and better-than-expected industrial output data for April being tempered by developments in the euro zone.

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Ratings agency Fitch cut Greece’s credit rating by three notches on Friday, pushing the country deeper into junk territory, and warned that any debt restructuring would amount to default. Greece was quick to react, with the Prime Minister as well as European Central Bank (ECB) officials rejecting debt restructuring and talking of budget cuts and privatization.

Credit rating agency Standard and Poor’s (S&P) cut its outlook for Italy to negative from stable, citing concerns about growth outlook and burgeoning debt.

The downward revision, which raises the risk of a downgrade of Italy’s sovereign rating, though not in the short term, confirms that the contagion from Greece’s and other European countries’ debt crises could be spreading to euro zone’s third largest economy.

This is a bad development for stock markets. A cut in the outlook may not trigger a sell off, but it will surely dent sentiments. Moreover, weakness in euro and strengthening of the dollar may push the commodities lower, which would also impact global stock markets.

As a result, the undertone on global bourses is pretty gloomy.

Back home, a cautious mood prevailed in the absence of any major market moving news. The prediction of normal monsoon is being seen as a positive trigger, but concerns over high rates of inflation, and the possibility of a further hike in interest rates in a forthcoming meeting of the Reserve Bank of India (RBI) restricted the build up of positive sentiments.

Indian stock markets witnessed losses on expected lines; however, the resilience shown by benchmark indices near their critical support was a matter of comfort.

The Nifty index on the National Stock Exchange, which saw good support just above its critical support at 5,391, technically showed signs of strength. Given the weakness on global bourses, I would maintain a cautious outlook unless Nifty falls below 5,391 with good volumes, or settles above 5,613 points for positive break-out.

This week, the Nifty, on its way down, would find its first support at 5,442; this will be a moderate but meaningful support—a dip below this level with good volumes should be seen negatively with the next support at 5,391 points.

This would be a critical support level, and if this goes with good volumes, the target for the Nifty would then shift to 5,246 —though there would be intermediate supports at 5,342 and 5,289 points. On its way up, the undertone would remain cautious, unless the Nifty closes above 5,613 with good volumes. Before that, the Nifty would see its first resistance at 5,523, which is a moderate resistance, followed by another moderate resistance at 5,578 points.

The trend deciding resistance would be at 5,613, which, if broken, would turn sentiments positive with an immediate target of 5,712 points. Global indicators to keep an eye on include new home sales for April, a second look at first-quarter gross domestic product, personal income and consumption for April, and the final reading for May on consumer sentiment.

Moreover, the data on Europe, covering the euro zone purchasing managers’ indices and various sentiment surveys, will also be watched closely. Apart from economic indicators, it will also be very useful to keep a close watch on the dollar index as any further sharp rise in dollar could be a good indicator of the fall on bourses globally.

This week Axis Bank Ltd, Sterlite Industries India Ltd and Infosys Technologies Ltd look good on the charts. Axis Bank, at its last close of 1,220.90, has a target of 1,245, and a stop-loss of 1,188.

Sterlite Industries, at its last close of 168.25, has a target of 173, and a stop-loss of 162; Infosys, at its last close of 2,849.85, has a target of 2,887, and a stop-loss of 2,791.

Vipul Verma is chief executive officer, Comments, questions and reactions to this column are welcome at