Ready and steady

One witnessed range bound and higher level profit booking because of the slightly overbought situation. Nifty finally ended at 8779.85. The weekly charts and monthly charts of Nifty and Sensex are in the buy mode and will keep the market steady this week, despite global volatility. Nifty has immediate support at 8733 and 8689. It has resistance at 8851 and 8932. In normal market conditions, Nifty may not move down below the previously said levels. Low level buying can be initiated, despite a weak opening last Monday.

Series of falls
India's trade deficit declined marginally. The trade deficit fell 38.1 per cent; exports fell 0.3 per cent and imports fell 14.09 per cent in August 2016, compared with the previous year in the same month. Consumer price index for August 2016 slowed to 5.05 per cent in August 2016, compared with the July 2016 consumer price index of 6.07 per cent. Market participants are of the view that Reserve Bank may cut lending rates in the next policy meet. If that happens, then it could act as a catalyst for the markets. Last week, India's IIP numbers came out, a tad below expectations; it fell 2.4 per cent in August.

Look at Dow
The Dow Jones which is slightly weaker than our markets. Dow closed at 18123 on Friday night, and it got support at 18013. It will face resistance at 18354 and 18500 levels. Technically, weekly and daily charts of Dow are showing weakness will persist in the short term. But interestingly S&P 500 VIX on Friday declined by 5.17 per cent and closed at 15.37, which indicates a lower level stock accumulation. India VIX closed at 14.53 on Friday, down by around 0.66 per cent. This is showing early reversal by the trend on the cards.

Gains wiped out
On Friday, we saw buying bouts on the morning trade, but after noon, due to profit booking Nifty erased some of its early gains; especially in the banking sector. Banking Nifty on Friday closed at 19855. It has support at 19729 and 19522. The first support is a strong support point and, most probably, we can expect a U turn on Banking Nifty on expectation of a possible rate cut.

Data in focus
The result season ended last week, and now investors are focussing on Q2 numbers. Investors are also keenly looking at the macro data, coming out next week. From US data like Continuing Jobless Claims, Initial Jobless Claims and Markit Manufacturing PMI and from Euro Zone data like Current account, Consumer Confidence, Unemployment, Balance of Trade, GDP Growth Rate, Market PMI, Markit Manufacturing PMI are due this week. Foreign Reserves and Deposit Loan growth data are expected this week from India. Balance of Trade and Nikkei Manufacturing PMI are announced next week from Japan.

Concerns about crude
Crude is looking extremely weak after reports that Iraq started pumping huge amounts of crude; the crude export in August jumped more than 15 per cent from July, which is almost equal to Iran's pre-sanction shipment levels. News reports on higher exports from Nigeria and Libya also kept the market under pressure. Investors are concerned about fresh supply and it may pull down the prices further southwards in the near term. It is prudent to buy stocks for medium term if there is a price correction.

Automobile, cement, OMC, capital goods and banking stocks are good for medium to long term.

Alex K Mathews is the founder of www.thedailybrunch.com