The stock markets are seen taking temporary support at 12,500 for the Sensex and 3600 for the S&P Nifty before heading lower in the coming days.

The benchmark indices did recover from the day's low on Monday with the Nifty gaining from 3568 to 3600, and the Sensex moving up from the day's low of 12,344 to 12,460. Despite the 2,000-point fall in the recent past, there are no signs of recovery, and analysts are cautioning investors against bottoming fishing.

Indices remain in a strong downtrend similar to May-June 06, and therefore further correction, price and time wise, can be expected, Morgan Stanley analysts said in a report released recently.

Given the oversold status, the indices are likely to complete the first leg of the downtrend and stabilise temporarily around the support level of 12500/3600 later this week.

Almost all sectors are likely to be hit going forward - with the worst being IT& telecom. Just about every technical indicator is hinting towards further downside in the near term. The daily RSI (relative strength index) hit a new 2-year low last week, which is a bearish development.

With divergence yet to be spotted, a bottom looks far away. Overall, March is likely to see further downsides. The 'Double Top' pattern that technical analysts spotted a couple of weeks back played a major role in taking the Sensex below the psychological mark of 13,000.

The indices are unlikely to end the on-going downtrend in a hurry as the technical set-up remains bearish.  The Sensex has already declined 2,000 points price-wise but needs to correct time-wise and hence the downtrend is likely to continue at least until May.

Foreign institutional investors (FIIs) turned net sellers during the entire last week after a gap of nine months. FIIs were net sellers to the tune of Rs 3,693.50 crore ($833.28 million) in five trading sessions between February 26 and March 2, 2007.

Earlier, in May 2006, between May 22 and May 26, FIIs net sales in a week totalled Rs 5,993.60 crore ($1.33 billion). They had pulled out a record Rs 7,354.20 crore ($1.630 billion) in May 2006.