25 September,2017 07:03 PM IST | Mumbai | Alex K Mathews
After the continuous uptrend, we saw heavy sell-off on Friday due to the weak rupee. There were growing geo-political tensions and weak Asian market cues
Union Finance Minister Arun Jaitley speaks at the India Economic Forum 2017 in the city. Pic/ PTI
After the continuous uptrend, we saw heavy sell-off on Friday due to the weak rupee. There were growing geo-political tensions and weak Asian market cues. Downgrading of Hong Kong after China, by the S&P rating agency also made Asian markets nervous. Domestic market VIX has risen by around 10 per cent on Friday and closed at 12.8 per cent. This is indicative of weakness in the market condition. On Friday, the Nifty lost nearly 1.56 per cent and closed below 10,000 marks. Going forward, Nifty is likely to trade towards 9,920 and 9,797 levels. Movement below these levels could trigger further sell-off and Nifty may test 9,700 levels. Nifty has resistance at 10,096 and 10,315.
Note the mode
As major sectors are in the sell mode, we can expect downside movements for Nifty at least in the early part of the week. Banking Nifty lost key support levels and it is likely to move down towards the 24,142 and 23,974 level. PSU Banking Nifty is the worst affected index in the NSE. PSU Banking Index has support at 3,115, 3,060 and 2,198. Price rise can be utilised to reduce long positions. Private sector banks are also looking weak. In general, both private and public sector banking stocks will witness more profit booking. After Chinese downgrade by S&P, metal prices crashed in the Chinese commodity exchange. NSE Metal Index has also looks weak and it may test 3,474 and 3,406 level.
Talk about stocks
Pharma and IT stocks may recover from lower levels, because of price correction and oversold situations. Selected front line stocks at these two sectors can be bought at corrections for a medium to long term perspective. As the NSE Index is on sell mode, we can expect highly volatile movements at these counters also.
FMCG stocks and Energy stocks will remain subdued for a while. It is prudent to reduce long positions at these two counters too.
Sustained flow of new issues (IPO) is a cause concern amongst market participants. Investors generally will book profits in the secondary markets. When these markets reach yearly highs, new IPOs will slowly and steadily suck up the liquidity. This will cause heavy profit booking in the secondary markets.
The Dow now
Now let us check Dow Jones, which is still in buy mode and may extend support to the Asian Markets. Dow has resistance at 22,416 and 22,514. Strong support can be expected at 22,285 levels. Rising geo-political tension can dampen positive sentiments, so it is prudent to stay safe by reducing overnight open positions.
US Trade Balance, GDP Growth rate and initial jobless claims are due. In the domestic market participants are keen on the outcome of the RBI policy meet on interest rates and CRR. Nikkei Service PMI and Foreign Exchange Reserve data is also due.
