"IF??" there is a Rally from current levels then it can take SENSEX to 10000 plus levels or even up to 10500. Resistances on the way up are at 9970 and 10325. But Long term outlook is certainly negative. In other words, we have not bottomed out so far.
Efforts by the RBI and Finance ministry to pep up the economy may not get reflected on the markets but would be helpful in long term. Reduction in fuel prices would ensure low inflation in the near times ahead. But nothing can stop the economy from slowing down though, the developing economies might recover sooner than the developed.

In the given scenario there is a hot debate going on among the investors about the "attractive" prices of the stocks. If viewed in terms of 52 week high then the prices seem to be at very attractive levels. But would it be appropriate to view the prices in terms of their 52 week high! Perhaps not...because we have yet to evaluate them in relation to their earnings because this earnings season could bring bad news to almost all the sectors.

Therefore, Long term investors should stay out for the moment and wait for another fall or invest in tranche with every 1000-2000 points cut in the SENSEX. The best area for long term investing would be between 6000-8000.
Short to medium term traders are suggested to accumulate NIFTY put options of January strike 2700 and March strike 2500 with every rise above current levels. Book any big or small profits in long positions immediately on every rise. On a fall below 2500 do not go long immediately until markets stabilize because we might see the levels of 2000 or lower below that.

To sum it up, there could be lurking some unseen positive element in the markets that helps in starting a bear market rally soon but negative elements are more visible in the form of impending economic data world wide.

A fall below 8400/8500 would be a clear indication to SENSEX breaching the previous lows and head down towards 6000 levels in near to medium term.