Nifty to move in the range of 4,680 and 5,100
The global slowdown and nervousness ahead of the US Federal Reserve chief's address to a gathering of central bankers from across the world on Friday pulled the market down this week. Concerns over domestic economic growth, the Reserve Bank of India lowering its growth expectations and the worsening paralysis in government following the widening anti-corruption movement, also weighed on investors, resulting in the market losing 2% this week, its fifth straight weekly loss.
The market closed higher on Monday and extended its gains the next day on support from European indices. The downgrade of Japan's sovereign ratings by Moody's pulled Asian markets lower on Wednesday and the Indian market also took a hit. On Thursday, the RBI, in its annual report, expressed concern over domestic growth and indications of a continuation of the tight monetary policy pulled the market further down on the last two trading days.
Overall, the Sensex declined 293 points, closing the week at 15,849, and the Nifty lost 98 points to 4,748. With the Nifty touching its 19-month low on Friday, the market could well regain some growth and some strength to move in the range of 4,680 and 5,100 on the Nifty.
While BSE TECk and BSE Capital Goods settled unchanged, BSE Metal and BSE Bankex declined 5%. There were no gainers in the sectoral list.
The top Sensex gainers this week were Bajaj Auto (up 5%), Bharti Airtel (up 4%), BHEL (up 3%), TCS (up 2%) and Hindustan Unilever (up 1%). The main losers on the index were Coal India (down 9%), Tata Steel, Jaiprakash Associates (down 8% each), State Bank of India and Maruti Suzuki (down 7% each).
The top performers on the Nifty were Bajaj Auto (up 5%), Bharti Airtel (up 4%), BHEL, Dr Reddy's Laboratories (up 3% each) and TCS (up 2%). The major losers were Reliance Capital (down 11%), Sesa Goa (down 9%), Punjab National Bank, Tata Steel and JP Associates (down 8% each).
Food inflation rose again to 9.8% for the week ended 13th August, from 9.03% in the previous week. In its Economic Outlook for 2011-12 published earlier this month, the Prime Minister's Economic Advisory Council had said that while pressure from food inflation had fallen in recent months, the rate of price rise still remained quite high, with the possibility of a surge in the coming months.
On Thursday, the RBI said India's economic growth could moderate to 8% in the current fiscal, from 8.5% a year ago, due to unfavourable developments. If global financial problems amplify and slow down global growth markedly, it would impart a downward bias to the growth projection, the central bank said.
In global news, US Federal Reserve chairman Ben Bernanke in his speech at Jackson Hole, Wyoming, on Friday refrained from announcing any new stimulus initiatives. But he added that should signs fail to materialize soon, the Fed's Open Market Committee would consider additional policy tools at its 20-21 September meeting, which has been extended to two days. Meanwhile, US GDP grew at a much slower rate of 1% in the second quarter, lower than the earlier estimated growth of 1.3%.
Moody's Investors Services on Tuesday downgraded its rating on Japan's bond rating to 'Aa3' from 'Aa2'. The agency said it lowered the rating because of Japan's large budget deficit and growing government debt. On Friday, Japanese prime minister Naoto Kan announced his resignation after almost 15 months in office. Mr Kan's resignation was expected since the devastating 11th March quake, tsunami and ensuing nuclear disaster that sorely tested his leadership, and prompted accusations that he mishandled the crisis.
Under capital issue related manipulation, eight companies were investigated, while 38 firms came under the radar of the market regulator for insider trading. Similarly, two companies were investigated for takeovers in 2009-10 and four the next year
New Delhi: The government on Friday said market regulator Securities and Exchange Board of India (SEBI) has examined shares of 213 companies in the past 29 months to investigate instances of price rigging and insider trading, reports PTI.
"Certain irregularities in share transactions have come to the notice of SEBI," minister of state for finance Namo Narain Meena said in a written reply to the Lok Sabha.
He said that based on complaints, SEBI conducted investigation into shares of 175 companies during fiscals 2009-10 and 2010-11 on charges of market manipulation and price rigging, capital issue related manipulation, and insider trading, among others.
Investigations in 38 scrips were carried in the first five months (till 23rd August) of the current fiscal.
The minister further said that investigations were completed in 146 cases during the last two financial years.
Investigations which have been completed during 2009-10 and 2010-11, include 97 cases related to market manipulation and price rigging, and 25 of insider trading.
Mr Meena further said that following investigations, action was taken against 1,321 entities in the last two fiscals. The action included, warnings, cancellation of certificate of registration of market participants and prohibitive directions among others.
The market regulator had examined shares of 44 companies for market manipulation and price rigging in 2009-10 and 56 in the following fiscal.
Under capital issue related manipulation, eight companies were investigated, while 38 firms came under the radar of the market regulator for insider trading. Similarly, shares of two companies were investigated for takeovers in 2009-10 and four the next year.
Companies whose shares were investigated in the 29 month- period beginning April 1, 2009, include, PNB, Reliance Industries, Tata Motors, NTPC and Hindalco.
Bottom fishing is like trying to catch a falling knife, but it certainly is becoming a tempting proposition for the brave-hearted
S&P Nifty close: 4747.80
SHORT term: Down MEDIUM term: Down LONG term: Sideways
The Nifty opened flat and rallied in the first couple of days, but could not sustain above 4,925 points as selling pressure mounted again. As a result, the Nifty declined sharply (almost hitting the S1 level of the week of 4,717 points) to close 98 points (-2.02%) in the red. The volumes were higher and the volatility high but subdued as compared to the previous couple of weeks.
The sectoral indices which led the decline were BSE Metal (-5.29%), BSE Bankex (-4.81%), BSE Reality (-4.01%) and BSE PSU (-3.40%), while the ones which outperformed were BSE Teck (+0.03%), BSE FCMG (-0.15%) and BSE Health (-0.27%).
The Histogram MACD continues to be below the median line as the trend is firmly down. Last week, we saw the Nifty dip into the crucial support area, between 4,675 and 4,786 points, below which a critical support is pegged at 4,538 points. We can see in the weekly chart above that the trendline (in green) pegged around 4,624 points will also provide support. Therefore, there is strong support pegged at slightly lower levels, from where at least a contra-trend rise could begin.
Here are some key levels to watch out for this week.
Despite the bears having an upper hand, they should be cautious especially at lower levels from here on.
The reason for this is that the current fall from 5,944 points equals the fall from 6,335-5,177 points as per the alternate cycle projection (ACP) method in the ratio of 100%, and as per the price cycle expansion (PCE) method in the ratio of 38.2%. Further downside targets as per the PCE method are 4,598 (50%) and 4,461 (61.8%) points.
Yesterday was the 34th day (Fibonacci number) from the recent high of 5,740 points (8 July 2011).
High volatility will continue this week as the bulls try to stem the rot around the supports.
We have seen relentless hammering, resulting in the Nifty closing lower for the fifth successive week. The lows of 4,675 (11 February 2010) and 4,538 (6 November 2009) should act as support in declines, and as mentioned last week, those short should start covering their positions.
As the Nifty drifts lower, the risk-reward ratio becomes uneconomical for sellers. Bottom fishing is like trying to catch a falling knife, but it certainly is becoming a tempting proposition for the brave-hearted. For those who prefer safety, wait for a bottom to be established before taking any long positions.
(Vidur Pendharkar is a consultant technical analyst and chief strategist at www.trend4casting.com.)