Wednesday, July 30, 2014

Nifty view for July 30, 2014

The Nifty lost 42 points over the trading session to close at
7748. A bearish day at the markets on Monday as the
indices opened flat but started to loose ground thereafter
breaking one minor support after another to get close to
the 7700 number. The momentum was strongly in favor of
the bears and most of the stocks that underperformed
during the upmove last week were the ones to be hit the
most. Expectedly the Bank Nifty was majorly responsible
for the Nifty downtick.
Technically, the quick turnaround from that resistance of
7840 is now making the case extremely strong for a top
last week. If this indeed turns out to be true then the
indices could remain within a short-term downtrend for a
couple of weeks atleast. Both price and time correction is
likely in this corrective phase unlike the previous
corrections of the last three months. The technical
indicators continue to exhibit weakness while the patterns
on the hourly charts hint at a reversal to be taking place.
The moving averages play an important role in trending
markets and hence will be on test around the 7620 mark.
Above that 7700 is the first point of support breaking
which could have a cascading effect on the price action.
The upside is looking capped to the 7800-7850 zone. The
Bank Nifty has room to fall by more than 3-4%. Overall, the
set-up hints at more weakness ahead.

Monday, July 28, 2014

Markets and indicators in bull grip

Just a few points as July series comes to an end.
The June series expired at 7,493.20 points and the current close of NIFTY is higher by 297.20 points or 3.96%. This gives the bulls a lot of leeway and comfort. Even though the market is looking tired the bulls don’t have to make too much of an effort to keep things going in their favour. Second his effort is aided by the aggressive FII who is supporting the efforts. FII’s have bought Rs 1,950 crs in the week gone by and about Rs 11,000 crs in the current month of July. If one looks at the first half of the calendar year January to June they have invested Rs 62,600 crs.
To add to the bull’smomentum the government is keeping the investor interest intact. After the budget which was presented where FDI in insurance was to be raised to 49%, in the last week the cabinet has approved the same. This means that the government wants to send a message loud and clear that they believe in committing only what they will do. The mandate that this government has received is a clear mandate to rule for five years and without the give and take of coalition politics. The country wants delivery and governance and this is the same thing that investors want.
To help the bulls even rain gods are obliging. In the last couple of weeks things have improved significantly and the rainfall deficit has reduced. From a drought like situation it appears we are moving towards the long term average monsoon rainfall and at worst some areas nay remain deficient in rainfall. This improved situation will be a boon when Raghuram Rajan has his policy review in the first week of August. Efforts at containing inflation particularly food which were likely to go awry in case the monsoon failed are all set to return to normalcy and may prompt the governor to soften interest rates.
Yet another factor favouring bulls is the improvement in corporate results. It is becoming increasingly clear that the economy has bottomed out and the worst is behind us. The results of India Inc are reflecting this hope and turnaround.
While the markets may not do much in the short term having risen from just about 20,000 in February on the BSESENSEX in February 2014 to currently above 26,000, a gain of 30%, the long term augurs well. An economy which has begun to bottom out, a new government with a clear mandate and meaning to set new standards of governance and finally an investor class from around the world which is investing in this story. I believe the bulls have it completely in their favour and though corrections will always happen, it’s a one sided game as far as bulls are concerned. The dice is loaded in favour of bulls.

Outlook for July 28, 2014

The Nifty lost 127 points over the week to close at 7790.
Barring Friday the bulls were in control the whole of last
week and the trend of higher tops and higher bottoms on
the price action continued with ease. However only two
sectors namely, IT and FMCG, contributed significantly to
the index gains while others underperformed. Technically,
the index tested our mentioned resistance of 7840 last
Friday and witnessed a 50-point decline. While it is too
early to judge, we think the markets could have potentially
formed a ST top last week. At best we could see another
higher high into the 7850-7950 zone but that itself looks
unlikely given the global equity market set-up.

The local technical indicators remain in bad shape. They
have refused to move even into the overbought zone last
week. The Elliot set-up suggests that the market is likely to
start a leg down that could last a couple of weeks or more.
The support remains in the form of 7700 and a break
below the same on a closing basis opens up targets like
7600/7530/7450/7365. We continue to believe that a
short sharp correction would help the underlying bull
market and make the set-up stronger for the next phase
up. The underperformance of the Banking and Capital
Goods index is a major worry. The global equity indices too
look toppish. For the day, resistance seen at 7807/7840.
Overall, the bears could potentially take control starting
this week.

Sunday, July 27, 2014

Nifty view for week beginning July 28, 2014

Nifty formed a sizeable bullish candle with a small upper shadow on the weekly time frame, indicating continuation of the positive momentum in the short term. The index, closed in green in four out of the five trading sessions and maintained a higher high and higher low in the weekly chart.

From a short-term perspective, the index has rallied for previous two weeks and has gained over 5% in the process
After such a one-way rally, a round of sideways consolidation or minor retracements to correct the overstretched conditions is not ruled out

Fatigue is also visible in the broader markets as evident from the muted performance of the midcap and small cap indices over the last three sessions. However, the overall bias continues to remain positive.

Any cool-off towards the 7700-7650 region will help correct the short-term overbought conditions and be considered a buying opportunity

The index had formed two distinct lows around 7440 during late June 2014 and mid-July 2014. A firm closing above the intermediate high of 7808 signals a breakout from the double bottom formation indicating end of a secondary consolidation and resumption of the primary uptrend

The measuring implication of the price pattern projects upsides towards 8175 in the near term. The presence of 161.8% price extension of February – April rally (5933 to 6819) measured from May 2014 low of 6638 placed around the 8100 region makes this a key near term target for the index

Domestic data points to be watched in the next week are the fiscal deficit and India’s Manufacturing PMI Earnings (Q1FY15) for index stocks due in the next week – HUL, ITC, Bank of Baroda, IDFC, Bharti Airtel, Sesa- Sterlite, Lupin, Dr.Reddy’s Labs and Maruti Suzuki

The U.S. FOMC meeting outcome along with US GDP data will be keenly watched by the market participants
The data releases from Eurozone expected during the upcoming week are Consumer Confidence, Unemployment Rate for June, Consumer Price Inflation for July and Markit Eurozone Manufacturing PMI.

Friday, July 25, 2014

Nifty view for July 25, 2014

NIFTY PCR_OI moved further up 0.95 (below 1, 6mth low at 0.65, 6mth high 1.36 in OCT.); 7900
CE saw addition of 6.41 lakh shares (with total OI 55.37 lakh shares), PCR OI 0.07; 7800 CE saw addition of 2.52 lakh shares (with total OI 48.59 lakh shares); On other hand 7800 PE saw addition of 13.09 lakh shares (with total OI 30.84 lakh shares), PCR_OI at 0.63; 7700 PE saw continued additions of 10.53 lakh shares (with total OI of 71.35 lakh shares), PCR_OI at 1.53, clearly implying support levels for NIFTY at 7680-7750.

The Nifty got past the lifetime highs but volumes & Open interest readings did not pick up doubting
the strength of the breakout move. Price move again below 7800 would be the first possible sign of
intraday weakness. No directional bets were noted in Bank nifty.
FIIs action saw liquidation in the Index futures. Clients added on to put longs in options segment.
Options activity picked up significantly in 7800 & 7900 PE on possible PE writing. Shedding was noted in 7700 CE.

Wednesday, July 23, 2014

Nifty view for July 24, 2014

The candlestick chart is showing a doji pattern, indicating a potential sell off in the Nifty.

Nifty Strategy
One possible strategy for the current scenario is to buy 20 lots of Nifty 8000 strike price call options @ 3.65 and buy one lot of Nifty 8000 strike price put option. The potential payoff is as below.

The Nifty gained 28 points over the day to close at 7795. An important day yesterday that will go
into the history books as the index registered a new all time high. Barring this price development there was nothing that was in sync with this achievement. We say this because the euphoria was missing, the clean bullish momentum was not there, participation was limited to a couple of sectors and volumes were not great.

Technically, the indices have completed the “V” shaped recovery. What is interesting to note is that during this recovery the market registered higher highs every day for seven sessions. However what continues to bother us is the fact that none of the technical indicators have made a higher high. The candlestick patterns have not completely supported the bulls and the oscillators remain overbought. These factors do not allow us to give out big upside targets from here. Taking into account all studies we think 7850-7950 is at best the market can move to. The immediate support now stands at 7700 and a close below the same would be the first indication of weakness. The deeper support is around 7570 where the moving averages stand.

The lack of participation of the Banking, Capital Goods & Metals sectors is clearly a cause for concern. Typically in the past they are the ones leading the market higher. The indices cannot sustain at these levels with just IT and FMCG doing well.

NIFTY PCR_OI moved further up 0.95 (below 1, 6mth low at 0.65, 6mth high 1.36 in OCT.); 7900 CE saw addition of 6.41 lakh shares (with total OI 55.37 lakh shares), PCR OI 0.07; 7800 CE saw addition of 2.52 lakh shares (with total OI 48.59 lakh shares); On other hand 7800 PE saw addition of 13.09 lakh shares (with total OI 30.84 lakh shares), PCR_OI at 0.63; 7700 PE saw continued additions of 10.53 lakh shares (with total OI of 71.35 lakh shares), PCR_OI at 1.53, clearly implying support levels for NIFTY at 7680-7750.

INDIA VIX closed at 14.69 (closed well below 10 and 20 DMA ) holding below crucial resistance 18, till it stays below it will imply bias of VIX turning negative (can lead to some more move up on Index as uncertainty will decrease), that would clearly signal NIFTY may test resistance 7800-7850 levels.

FIIs volume pick up in Cash market, on Cash Front on Wednesday they turned buyers to the tune of 652 Cr. DIIs turned
sellers to the tune of 292 Cr.; On F & O Front, FIIs turned buyers in index Fut. to the tune of 52 Cr.; Index options turned buyers to the tune of 94 Cr., Stock Future buyers 625 Cr.; FIIs continue to be buyers on cash front (quantum drop), with buyer in Index Fut., along with buyers in Index Options, implying NIFTY hold support 7630-7670 levels.

Over all PE writers add aggressive positions; Index will find support 7630-7670 levels.

Sunday, July 20, 2014

Nifty outlook for week beginning July 21, 2014

Nifty formed a bullish candle and closed near the high of the week recouping most of its previous week decline. The index, during previous week, gained over 210 points over four consecutive sessions and expected to pause and consolidate the gains in the upcoming week amid subdued global cues. After last week’s sharp decline, we expect the index to remain in a sideways consolidation mode between the broad range of 7800 and 7440 in the short-term

Stock specific price action is likely to continue within this consolidation phase as the result season pans out
A strong close above the recent life high of 7808 will confirm a double bottom formation around the 7440 region. This indicates conclusion of the secondary corrective phase and signals resumption of the upward momentum towards 8100 in the near term

The low formed last week (7447) is placed precisely near the late June 2014 low of 7441
The index has held above 7441 despite high volatility in last week’s trade. Only a decisive break and close below 7441 would put bulls on the back foot and open an extended profit booking towards the 7200 region to retrace the strong gains amassed during the May-June rally (6638 to 7808)

Next week, Q1 earnings from the following Index stocks - ACC, Ambuja, Asian Paints, Axis Bank, Cairn India, HDFC Limited, HDFC Bank, Wipro and Ultratech Cement

Important data releases for the week from the US would be jobs data (initial jobless & continuing jobless claims), housing (new home sales, existing home sales, home price index), retail sales and Industrial Production Data

Eurozone would be releasing data for Consumer Confidence and Markit Manufacturing, Services & composite PMI during the next week

Wednesday, July 16, 2014

Nifty tech trends for July 16, 2014

The Nifty gained 72 points over the day to close at 7526. Volatility returned yesterday and it favored the bulls as the
market weakened in the first half down close to 7450 levels but saw a smart recovery thereafter of almost 80 points
leading to a close at the day’s highest point. The Bank Nifty contributed significantly to the index gains. Technically,
the rally cannot be given too much importance as it has done nothing to suggest that the market is in reversal mode. After the big fall seen last week the hourly charts had turned a bit oversold and the sentiment too had turned overly pessimistic (suddenly) and this could have been normalized yesterday. The level of 7630 continues to hold a lot of importance and till the index is below the same on a closing basis we will have to believe that the correction is on.

Minor resistance seen around 7570 levels for the next day or two. The moving averages also remain above the price
action, which is important to monitor in the next few days. Given the trading action of the last three sessions, a new
support has been created at 7450 levels. Breaking this would trigger a move down to the levels we have been
presenting recently. The IT Index looks critically placed at this point. Either it would start a large leg down or
completely negate the set-up and resume the uptrend. This could potentially decide the fate of the Nifty. Overall, the
index is likely to run into resistance once again.

Support : 7516, 7500
Resistance : 7536, 7562

Sunday, July 13, 2014

Nifty outlook for week beginning July 14, 2014

After testing our weekly derivatives target of 7800 early in the week, the Nifty witnessed profit booking amid stock
specific leverage closure and in the process shed over 4.5%

Looking at the current set-up, the highest Call base is placed at the 8000 strike of over 1 crore shares. However, in the last couple of trading sessions, Call writing focus seems to be in near the money Call strikes, with OI of 7800 Call increasing to over 50 lakh shares. Thus, the level of 7800 is likely to act as a stiff resistance level in the coming week.

On the lower side, since the inception of the series, 7500 Put strike was commanding the highest OI addition and has
over 50 lakh shares in OI. The average shorting price for this strike is | 60-70. Thus, on the lower side, 7430-7440
remains the key support level

In the current decline, the advance decline ratio has constantly been in the red with stock specific leverage constantly pressurising stocks to head lower

A move below the aforesaid support zone may trigger a more severe leverage closure based selling, which could push the Nifty towards 7200, which was the break out zone post election verdict in May 2014

Nifty formed a bearish engulfing candlestick pattern in the weekly time frame and closed near the low of the week. Heavy profit booking during previous week saw the indices giving up all its previous weeks gain and closed near the previous low of 7441.

Key intermediate support for the index is around 7385 levels being the 50 days SMA and the 161.8% extension of the previous decline

Only a sustained break and close below the support level will indicate waning upward momentum and lead to a round of profit bookings towards 7200 levels in the near term

Post the election result session, index had formed a steady base precisely around 7200 region before embarking upon its current up move

Further the 50% retracement of the entire rally from May 2014 low of 6638 to the recent all time high of 7808 is also placed around 7200 making this a key short term support for the index

On the higher side Budget sessions high of 7730 will be acting as a major resistance for short term

On the domestic front, Industrial Production data and inflation numbers (Retail Inflation – CPI and Wholesale Inflation – WPI) will be released during the next week

On the corporate front, results of TCS, Kotak Mahindra Bank and Bajaj Auto will be announced during the week

Important economic events releases in the US for the next week - new home sales, existing home sales, home price index
Jobs data (initial jobless and continuing jobless claims) and industrial production data
From the Eurozone, important data to be released in the coming week will be industrial production, trade balance and inflation (CPI)

Saturday, June 28, 2014

Nifty outlook for week beginning June 30, 2014

A classical Doji candle on the weekly chart on the Nifty spot index. Next week, above 7595, Target 7745 and below 7440, Target 7290. Get ready for big moves as we enter a week ahead of a Budget full of sky high expectations.

Going ahead, Nifty is likely to find support near 7400 levels as the open interest base in Put options is almost equally spread out from 7400 to 7000 levels. Nifty futures open interest had declined by 30% in the last month with rise in Nifty from 7240 to 7493 levels when we compare May and June expiry closings. This time the roll spread had increased from 32 to 45 in the last few sessions near expiry. This means fresh long positions have been formed in the index.

Sunday, June 22, 2014

Nifty outlook for week beginning June 23, 2014

Nifty formed a small bear candle with a long upper shadow highlighting profit booking at higher levels after recent strong gains. Nifty during previous two weeks continues to consolidate in a tight range of 7500-7700

The index displayed resilience in the face of volatile global cues and rising crude oil prices over the last few sessions as it held on to its intermediate support around 7500 being the confluence of 38.2% retracement of the last up move (7218 to 7700) placed at 7500 and the bullish gap area formed on June 6, 2014 between 7497 and 7474

The Nifty has so far retraced just 38.2% of its preceding six session rise (7218 to 7700) around 7500 while consuming eight sessions

The larger time correction and shallow price correction indicates a healthy corrective decline within an ongoing uptrend. Therefore, we believe if the index holds above the bullish gap area of 7497-7474, that will keep bulls in fray for an eventual breakout above the recent all-time high of 7700

Volatility is likely to remain high in the coming week on account of F&O expiry of the June series on Thursday and rising crude oil prices

On the domestic front, there are no major data releases for the next week

Important economic events releases in the US for the next week apart from the housing (new home sales, existing home sales, home price index) and jobs data (initial jobless and continuing jobless claims) are the Q1 GDP data, manufacturing and services PMI, consumer confidence index

From the Eurozone, important releases would be the PMI data (manufacturing and services), consumer confidence, industrial confidence and economic confidence indices

From Asia, China is likely to post the manufacturing PMI data which would be tracked keenly while from Japan, unemployment data and inflation data (CPI, PPI) would be monitored closely