The markets are looking vulnerable and the week ahead would be choppy
It was a bad week for stock markets. The net loss on the BSESENSEX was 633.37 points or 3.76 per cent to close at 16,213.46 points. The NSENIFTY lost 183.45 points or 3.63 per cent to close at 4,866.70 points. The broader indices like the BSE100, BSE200 and BSE500 lost 3.47 per cent, 3.34 per cent and 3.23 per cent respectively while the BSEMIDCAP and BSESMALLCAP lost 2.47 per cent and 2.21 per cent. Stocks from almost all sectors fell with the big losers being PFC, which was down 9.79 per cent, Sesa Goa 7.75 per cent, ICICI Bank 7.11 per cent and Reliance Industries fell 6.91 per cent.
The Parliament logjam was resolved with FDI in multi-brand retail being put on hold. Inflation has started coming down but the Industrial Index of Production (IIP) too has been slipping into negative territory. There is serious threat of India facing a slowdown and this could affect the fiscal deficit dramatically. On the one hand subsidies and expenditure is rising and on the other hand revenues are falling. There is a sort of policy paralysis in the country and it's indeed a tragedy that when the need of the hour is to deliver, on some pretext or the other our house of representatives is not functioning. The next few days the Lokpal Bill will create another ripple in the house.
The Eurozone crisis has been averted with a simple decision. All 27 nations except the UK have agreed to reduce expenditure, increase taxes and allow their budgets to be monitored by the ECB, which is the European Central Bank. It does not mean much except that the Euro remains for the time being and the markets, which rose in Europe and the US, may see some more rise for the time being. The accord however small and temporary in nature has avoided a crisis for the time being.
The decision by the European Union is basically an admission that for an economy to perform the expenses must be reduced and revenues be raised by raising taxes. They have also agreed that discipline is very important and anybody violating the same would be subject to penalties.
I am sure the crisis was much more than this. Anyway the markets in Europe and the US were positive for the day and one hopes it remains like that for some time.
Indian Rupee depreciated during the previous week and closed at Rs 52.05.
Institutional business has slowed down considerably and the net FII buying for the previous week was a paltry Rs 59 crore, while domestic institutions sold Rs 235 crore.
The action of domestic institutions is very clear that they will sell on rallies and will buy on sharp dips. The volatility in the markets have increased considerably and of the four trading days last week we saw intraday movement of over 250 points every day and with Thursday having a movement of almost 430 points. This kind of volatility indicates that the market is still struggling to find its own level and the flight of investors from the markets is continuing. This state of affairs is unlikely to improve for some time to come and would probably improve post the Union Budget.
The week ahead would again be choppy and the markets would have a bearish undertone.
Probably we would look at the Indian issues and economy and all eyes would be on the RBI Governor and what he does in thee six weekly review on Friday December 16. Expectations are that he would not only pause but also reduce CRR this time around; looking at the fact that inflation is moderating.
The BSESENSEX has support at 16,109 points, then at 15,965 points, then at 15,849 points, then at 15,751 points and finally at 15,479 points. It has resistance at 16,349 points, then at 16,590 points, then at 16,764 points, then at 16,888 points and finally at 17,003 points.
The NSENIFTY has support at 4,832 points, then at 4,772 points, then at 4,756 points, then at 4,693 points and finally at 4,640 points. It has resistance at 4,909 points, then at 4,986 points, then at 5,030 points, then at 5,099 points and finally at 5,142 points. The markets are looking vulnerable and every rally should be used to exit the market and for traders to build short positions.