Thunderclouds hover over investors and there is not a silver lining in sight
Thunderclouds hover over investors and there is not a silver lining in sight
On the whole, the week that had gone by was was negative for the markets except on last Monday. One needs to thank God that the week was shortened on account of the Republic Day holiday mid-week; otherwise things could have been worse.
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The market has now broken crucial supports and is trading below the 200 DMA (200 days moving average) for the last two days. It needs to close above this level for any significant rally in the market. The current level of the 200 DMA is 18,805 for the BSE SENSEX and 5,643 for the NSE NIFTY.
Hammered
The BSE SENSEX lost 611.56 points or 3.32 per cent in a mere four trading sessions, to close at 18,395.97 points. The NSE NIFTY lost 184.35 points or 3.34 per cent to close at 5,512.15 points. The broader indices like the BSE 100, BSE 200 and BSE 500 lost slightly more at 3.59 per cent, 3.68 per cent and 3.72 per cent. The BSE MIDCAP lost a significant 4.25 per cent and the BSE SMALLCAP an even higher 4.68 per cent. Once again the BSE BANKEX lost significantly less than the rest and was down 3.02 per cent. The BSE REALTY index was hammered this week losing 215.15 points or 8.62 per cent to close at 2,279.62 points.
Open
There was one IPO that opened for subscription during the week. Omkar Speciality Chemicals Limited was subscribed 4.67 times. The IPO, which listed this week, was Mid-Valley Entertainment Limited, which closed for the week under pressure, losing Rs 13.90 or 19.85 per cent. The issue was priced at Rs 70 and had raised Rs 60 crore. Tata Steel FPO shares are likely to be listed in the current week as the allotment has been done.
Sentiment
There are no IPOs in the current week and they may now be some time away as the market sentiment has been badly hit. It appears that the mood and market sentiment may improve after a good issue from the government. It needs to be seen as to whether SAIL or ONGC can lift the sentiment and help revive the primary markets.
Inflation
RBI, in its policy review is clearly worried about inflation and did raise interest rates by 25 basis points but the tone of the review clearly indicated that more could come in the near future. Foreign Institutional Investors have continued their selling at the bourses and sold approximately Rs 2000 crore in the last week. Since the beginning of the month or the current year, their net equity sales have crossed Rs 4,200 crore. In world markets the Dow closed on a weak note on Friday losing 166 points or 1.39 per cent to close at 11,823 points.
Crucial
Coming to the week ahead, there could be a small pullback simply because we have lost a lot of ground. Beyond a small pullback nothing more should be expected. Markets have broken crucial ground and have now become vulnerable and subject to selling pressure. The theory of selling on rallies would hold investors in good stead in the immediate short term.
Support
The BSE SENSEX has support at 18,235 points, then at 18,179 points and then at 17,973 points. The final support for the week is at 17,692 points. The index has resistance at 18,667 points, then at 18,995 points and then at 19,079 points with the final resistance at 19,155 points. The NSE NIFTY has support at 5,443 points, then at 5,380 points and then at 5,348 points. Its final support for the week is at 5,288 points. The NIFTY has resistance at 5,597 points, then at 5,645 points and then at 5,722 points. Its final resistance is at 5,752 points.
Declines
The markets have certainly turned weak with their inability and failure to respect the 200 DMA. The technicals have now become weak and with results from companies showing cost pressures, the drivers for the rally seem to be reducing or diminishing. It doesn't seem to make sense to buy on declines without strict stop losses but it certainly makes sense to sell on rallies and then buying back on dips. Markets have become vulnerable, and are under severe selling pressure from all quarters. Avoid fresh investments.u00a0u00a0
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Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website https://ak57.in
Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever.
All matter published here isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions.
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Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.
Egypt tensions tell on oil
The markets surrendered to the bears this week with the Nifty slipping below 5600. The overall sentiment of the markets weakened during the week's trade, which took the markets down to the bottom.
The markets slipped primarily due to domestic issues and a pinch of global economic data, which added to the negative sentiment.
Commodity prices too slipped considerably this week with precious metals losing their sheen.u00a0 The European as well as the US markets were also not giving any major trend and were subdued in trade.
Three major domestic events
We had three major events domestically, the RBI policy review, food inflation number and the F&O expiry. The RBI rate hike was the most awaited event and it all happened in-line withu00a0 market expectation. RBI hiked the Repo and Reverse Repo by 0.25 per cent and left the CRR unchanged.
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This brought minor buying banking and financial stocks on last Monday along with good results from SBI and ICICI Bank. Later though there were concerns of a further hike in interest rates given the fact that the food inflation is still ruling and these stocks gave up most of their gains.
The food inflation numbers were almost flat at 15.57 per cent against the previous figure of 15.52 per cent. The index for food articles group rose to 190.8 from 190.6 due to higher prices of jowar, maize, fruits and vegetables, fish and chicken and it is expected that price pressure could be seen in oil, raw materials, minerals and fibres.
Egypt tensions play their part
Crude oil got support at around $85. It may test $93 and $95, due to tensions in Egypt. It came sliding down $ 85 this week, after Saudi Arabia's Oil minister indicated that OPEC might increase supply to meet growing demand in China and India and also on increasing inventories in US. Base metal, even though down, may witness buying at lower levels.
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Cocoa prices hit 1979 highs as Ivory Coast's decision to ban exports created fear of supply disruption. Gold is getting support at $ 1312 and $ 1308.u00a0 Targets for the gold are $1351 and $1368.u00a0 The weak rupee can give some minor support to gold, because the rupee may fall towards 46.2332 in the short term.
Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill.
He is also the technical and derivatives research head of Geojit BNP Paribas Financial Services Ltd. The author may have a vested interest in investments he has recommended. Feel free to e-mail him at alex@geojit.com.
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Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever.
All matter published here isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions.
u00a0
Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.
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