Negativity and weakness demand large amounts of prudence and patience
A dragon is moved along during the parade to mark Chinese New Year, the Year of the Dog, in Chinatown district in London, yesterday. Pic/AP/PTI
Nifty on Friday closed negatively at 10.452 due to heavy sell-off in banking sector stocks. Technically Nifty may face more selling in the days to come, because most sectors are weak due to negative news. So it is prudent to stay on the sidelines or accumulate stocks with strong fundamentals at declines in a phased manner. Nifty has support at 10,278 and has resistance at 10,523 and 10,761. Banking sector is the weakest among the various other sector indices.
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Looking weak
Nifty Banking index has support at 24,816 and resistance is at 25,621 and 25,781. Both PSU Banking Nifty and Private Sector Banking Nifty are weak, but minor technical pull back can be seen in PSU Banking Stocks on Tuesday. Technical rallies can be utilised to exit from banking stocks. Nifty Private Sector banking stocks may also witness more profit booking because of higher valuation. Nifty Private Banking Sector index has support only at 13917. If the Private Banking Sector Index moves below this level then more selling can be expected. The sustained selling is of course, partly due to the news of the Nirav Modi-Mehul Choksi shocker.
China check
Chinese markets were closed from February 15 to February 21 due to Lunar New Year. US wholesale price rose 0.4 per cent in January, the biggest increase since November. The latest report says that US commerce Department proposes hefty import duties on steel and aluminium imports which may negatively affect market sentiments.
Dow Jones rallied last week and erased most of its earlier losses, but market sentiments are still weak due to higher VIX, S&P 500 VIX is at 19.46 on Friday. US Commerce Department reported on Wednesday that consumer prices rose more than expected in January by 0.5 per cent, sending US bond yields higher. This is a concern.
Metal, IT and Auto sector stocks may under perform next week, but buying can seen in Nifty Pharma and Nifty Cement indices. Nifty Mid-Cap index is still in the negative side and advance decline ratio in this sector clearly shows persistent weakness to continue. On the macro front WPI Fuel, WPI Food, WPI Manufacturing, WPI Inflation YoY January and Balance of Trade will come out next week. From US Markit Manufacturing PMI, US FOMC minutes and US Monetary policy reports are expected. Corporate results like Ambuja Cement, KSB Pump, Mereck and Sanofi are due next week.
Crude cues
Crude is looking sideways in the technical charts, higher production and number of oil rigs operating in the US jumped to 798, the highest level since April 12, 2015. This kept the prices lower. Later, the weak dollar supported prices. Crude has support at $58.4 and resistance at $63.35 per barrel in the short term. The commodity may consolidate for some more time before it makes a new yearly high.
Alex K Mathews is the founder of www.thedailybrunch.com
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