The fear factor
Volatility all around plus atmosphere of uncertainty and unease triggers sharp falls
Traders on the floor of the New York Stock Exchange (NYSE). Stocks opened higher on Friday with the Dow up over 300 points. Pic/Getty Images/AFP
As expected, equity markets across the globe started falling with the huge volatility. The fear index (VIX) in US moved above 40 at one point of time and finally on Friday it closed lower by 13 per cent at 29, which is still very high, indicating market uncertainty.
According to technical charts, S&P 500 VIX (US) has broken out the trend line and it could move up further, suggesting volatile days ahead. In the domestic market, Nifty VIX moved up by around 8.2 per cent on Friday and closed at 19.23. Rising crude oil price, a weak dollar, expectation of higher interest rate regime and raising interest yields in US are the key reasons for the sharp fall in the markets. Apart from all these, the relative strength index was in the overbought zone. It corrected marginally but was yet to give a buy signal.
On Monday, the Indian market may open with a positive gap, but it will be difficult for the market to sustain at higher levels due to a weak technical set up. Nifty has support at 10,390 and 10,295. A decisive move below 10,295 can cause immense selling pressure. Resistance for Nifty lies at 10,580. If Nifty manages to close two days consecutively above this level, then we can expect a reversal, but chances are remote.
Nifty Bank Index has support at 25,199 and resistance at 26,358. Technically Nifty Bank has yet to give a buy signal. Among the PSU and Private Sector Banks, the latter looks firm. Nifty Private Bank Index has support at 14,082, and selective stocks from the Private Sector Banks will support the market on Monday. The PSU Banks may under perform at the overall market. Nifty metal stocks may also move up in the short term, Metal index may move up nearly 100 to 120 points next week. Like Nifty Metal Index, Nifty Auto Index, Nifty IT and Nifty Pharma indices do look better.
US Inflation rate YoY, Initial Jobless Claim and Industrial Production YoY are due from US. Industrial Production, Inflation rate YoY, Manufacturing Production YoY and Balance of Trade is the macro data due. Companies like ABAN, Bank India, BF Utilities, Britannia, Century Text, Fin Cable, GAIL, Inter Globe, Rajesh Exp, ZUARI, CRISIL, Apollo Hospital are some of the few companies expected to announce their quarterly earnings.
Crude oil looks weak, after the Baker Hughes rigs count, which surged to a 34 month high. The number of rigs operating in the US rose by 26 to 791. US rising crude output would offset major oil producer's efforts. As the crude oil charts are still in oversold territory it could get support at $57.93 and has resistance at $60.64 per barrel.
Alex K Mathews is the founder of www.thedailybrunch.com