A small contra trend recovery could materialise but bears in control

It is now very clear that the bulls have to regroup and make serious efforts if they have to stem the rot as the bears run riot. The first step in this direction would be to stage some sort of a small come-back this week

S&P Nifty close: 4710.05

Market Trend

Short Term: Down         Medium Term: Down        Long Term: Down

The Nifty opened lower for the week as the bear hammering continued. We saw a bottom on the 23rd (as was envisaged in last week’s piece) as the Nifty staged a smart intra-day recovery but it was successfully tested the very next day. The Nifty lost another 195 points (-3.99%) on higher volumes than last week as the bears tightened their grip. The sectoral indices which outperformed the market were BSE Healthcare (+0.23%) and BSE Capital Goods (-0.18%) while the ones which underperformed were BSE Metal (-5.35%), BSE Consumer Durables (-4.91%), BSE Oil & Gas (-4.81%) and BSE FMCG (-4.31%). 

The weekly histogram MACD has fallen below the median line confirming that the bears are in control. It is now very clear that the bulls have to regroup and make serious efforts if they have to stem the rot as the bears run riot. The first step in this direction would be to stage some sort of a small comeback this week. If they are unable to do so then they will be in a more precarious position.

 Here are some key levels to watch out for this week.

  • As long as the S&P Nifty stays below 4,741 points (pivot) the bulls will remain under pressure.
  • Support levels in declines are pegged at 4,608 and 4,506 points.
  • Resistance levels on the upside are pegged at 4,843, 4,929 and 4,975 points.

Some Observations
The bears have established their supremacy and the onus is now on the bulls to rescue the desperate situation they find themselves in.
1.    Resistance in rallies is pegged at 4,929, 5,019 and 5,109 points (retracement levels of the fall from 5,399-4,639 points.
2.    A double bottom at 4,640 on the intra-day charts gives an upside target of 4,800 provided we do not sustain below 4,700 now.
3.    The volumes in the last two weeks fall have been high implying that rallies if any will be sold into.
4.    If the recent lows hold a small contra trend bounce is expected which could top out around 1st December 2011.
5.    If the small rally does take place around 1st December, use this as another selling opportunity.

A temporary bottom as expected materialized around the 23rd November, which did trigger some short covering during expiry. However, it has not been able to maintain these gains and it will be interesting to see whether we witness a smart recovery into the mid of this week, which can be used as an opportunity to sell. If the rally does take place then the battle will become interesting rather than a one sided one as seen for the last 3-4 weeks.

(Vidur Pendharkar works as a Consultant Technical Analyst & Chief Strategist, www.trend4casting.com)


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IRDA announces client persistency norms for corporate agents

Under the persistency ratio, which would be effective from 1 July 2014, IRDA has made it for corporate agents to retain 50% of their clients

New Delhi: The Insurance Regulatory and Development Authority (IRDA) on Friday came out with guidelines for persistency ratio under which it would be mandatory for corporate agents to retain 50% of their clients. The guidelines would be effective from 1 July 2014, reports PTI.

Extending the guidelines, already in place for individual agents, to the corporate agents, IRDA said the norms are applicable for those who solicit life insurance business.

“The stipulated persistency rate requirements will be effective for all corporate agency renewals that are due from 1 July 2014,” IRDA said in a circular.

For computing the persistency ratio, the policies which continue to provide insurance cover to clients after the end of premium payment (auto cover policies) can be included.

However, the policies which have already matured, or wherein death or surrender has happened, would be exempted from calculating persistency ratio for the agent.

Further, employees of both life and general insurance companies cannot engage their relatives as corporate agents.

The term relative in this case is defined as spouse, sisters, brothers, parents, sons, daughters-in-law, daughters and sons-in-law, besides spouse, dependent children or dependent step children whether residing with the employee or not.


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