Calm expected after rocky time as things move into buy mode
One witnessed range bound and higher level profit booking due to the slightly overbought situation. Nifty finally ended at 8779.85. The weekly and monthly charts of Nifty and Sensex are in 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, the Nifty may not move down below previously said levels. Low level buying can be initiated and despite a weak opening last Monday.
India’s trade deficit declined marginally. The trade deficit fell 38.1 per cent; export fell 0.3 per cent and import fell 14.09 per cent in August 2016, when compared with August 2015. Consumer price index for August 2016 slowed to 5.05 per cent in August 2016, compared to the July 2016 consumer price index of 6.07 per cent. Market participants say that the Reserve Bank may cut lending rates in the next policy meet. If that happens, then it could act as a catalyst for the markets. India’s IIP numbers came out, which were a tad below expectation; it fell 2.4 per cent in August.
The Dow Jones which is slightly weaker than our markets. Dow closed at 18123 last Friday night. It got support at 18013. It will face resistance at 18354 and 18500 levels. Technically weekly and daily charts of Dow are showing weakness to 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 lower level accumulation of stocks. India VIX closed at 14.53 on Friday, down by around 0.66 per cent and shows early reversal on trends on cards.
Friday we saw bouts of buying in morning trade, after noon though due to the 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.
With the result season coming to an end, investors are focussing Q2 numbers. Other than results, investors are keenly watching the macro data this week. From US data’s like Continuing Jobless Claims, Initial Jobless Claims and Markit Manufacturing PMI and from Euro Zone data’s like Current account, Consumer Confidence, Unemployment, Balance of Trade, GDP Growth Rate, Market PMI, Markit Manufacturing PMI are due next week. Foreign Reserves and Deposit Loan growth data are expected next week from India. Balance of Trade and Nikkei Manufacturing PMI are announced next week from Japan.
Crude is looking extremely week 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, 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. Arun Kejriwal’s column will return next week.