Bulls defend 4,720 but fail to take out 5,169 points, which means uncertainty continues

The bulls have to defend the recent low of 4,720 points to keep their hopes alive. On the other hand, only a crossing of the recent high of 5,169 points will indicate that there is still some steam left in the current rise for the months ahead

S&P Nifty close: 4,943.25

Market trend
SHORT term: Down        MEDIUM term: Down        LONG term: Sideways

The Nifty opened a tad lower and dipped on the first day of the week, and contrary to general consensus, ended the F&O settlement enquiry on a firm note. During the week, the Nifty hit a high of 5,034 points (R1 was 5,080 points) after recovering sharply from a low of 4,758 points (S1 was 4,742 points), but still fell miserably short of coming near the last few weeks' top of 5,169 points. Volatility was high during the week (which was a bit surprising considering that the volatility of the previous 3 weeks was also high) and the failure to take out 5,169 points leaves the situation fluid. The only promising aspect of last week was the Nifty surviving the recent low of 4,720 points. Volumes were flat as the Nifty closed 76 points (+1.55%) in the green. The sectoral indices which outperformed were BSE IT (+5.81%), BSE Teck (+4.32%), BSE Oil & Gas (+2.80%), BSE Realty (+2.29%) and BSE FCMG (+2.06%) while the ones which underperformed were BSE Metal (-4.50%), BSE CDS (-4.32%) and BSE CGS (-3.77%).  

The Histogram MACD continues to be below the median line implying that the medium term trend is firmly down and what we are witnessing is a corrective rise. As mentioned above, the positive from last week was the Nifty surviving above the recent low of 4,720 points-and the negative was it was not able to cross the recent high of 5,169 points, which is imperative for further strength.

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

  • As long as the S&P Nifty stays above 4,912 points (pivot) the bears will be under pressure.
  • Support levels in declines are pegged at 4,790 and 4,636 points.
  • Resistance levels on the upside are pegged at 5,167 and 5,294 points.

Some Observations
The bulls did survive a scare last week as they defended the 4,720 points level, ably.
1.    Resistance in any further rise will be provided by the "gap area" between 5,229-5,323 points.
2.    Only a close of the above mentioned "gap area" could lead the foundation of a retracement of the entire fall from 6,338-4,720 points, though no confirmation is available as yet despite the last few weeks of recovery.
3.    If the Nifty fails to hold the recent low of 4,720 points, there will be doubts about the strength of this recovery and the distance it could go.
4.    The Nifty not being able to cross the recent high of 5,169 points will signal that the upside in the market is capped in the 5,350-5,500 range in this corrective rise.
5.    The upside "gap" between 4,879-4,905 points is to be watched closely, as this is the immediate support area. If this is not closed, then it will indicate the earliest sign of the bulls becoming a little stronger.

The bulls have to defend the recent low of 4,720 points to keep their hopes alive. On the other hand, only a crossing of the recent high of 5,169 points will indicate that there is still some steam left in the current rise in the months ahead, while a breach of 4,720 points would make the situation very fluid and will indicate that the upside in the months ahead will be capped in the 5,350-5,500 range. We have seen the bulls survive a scare last week and they have to continue to defend resolutely in the weeks ahead if they have to take the market higher. It's advisable to play stock- and sector-specific moves till the Nifty moves out of this range.

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


Microfinance industry: Genesis of current crisis, lessons learnt, challenges and prospects

Ramesh Arunachalam, Development Practitioner, held an exclusive session at the Moneylife Knowledge Centre on the issues facing the Indian microfinance industry and the steps that can be taken to put the industry back on track

Has the Indian microfinance industry lost its track? Is the industry at the peril of being usurped by usurious interests? What are the prospects and challenges facing this sector? Ramesh Arunachalam, Development Practitioner, spoke on all these issues at an exclusive seminar held by Moneylife Foundation at the Moneylife Knowledge Centre on 1st October.

Mr Arunachalam is unarguably the most authoritative voice on Indian microfinance.  He has over two decades of strong grass-roots and institutional experience in rural finance, MSME development, agriculture & rural livelihood systems, rural & urban development and urban poverty-alleviation across Asia, Africa, North America and Europe.

The comprehensive seminar touched upon all aspects of the microfinance industry, like the crisis in Andhra Pradesh, the challenges impacting the growth of this sector, financial inclusion and policy-level challenges. Mr Arunachalam also charted a roadmap for the industry-he elaborated on key issues that went much beyond the current crisis and spoke on the need to re-engineer the complete financial inclusion paradigm.

As usual, it was a packed session, enriched by the key takeaways that Mr Arunachalam provided.   

Mr Arunachalam has worked with national and state governments, multilateral agencies, bilateral donors, regulators and supervisors including central banks and ministries, commercial banks, and MFIs, NGOs, the private sector and other stakeholders.


Market under stress: Weekly Market Report

Nifty to move in the range of 4,800 to 5,000

Greece's struggle to implement harsher austerity measures in a bid to gain confidence of international monetary agencies for a fresh bailout package pushed aside fears of a domestic slowdown that was portrayed by Indian policymakers, resulting in the Indian stock market closing the week with a gain of 2%. However, the market shrank 12% in the September 2011 quarter, posting its worst quarterly performance since the Lehman Brothers collapse in 2008.

Issues relating to the debt crisis in Europe and its impact on the world economy kept the market down on Monday. However, positive global news enabled the market to notch up gains of 3% the next day. Concerns about lower second quarter corporate earnings dragged the indices down on Wednesday. The market bounced back on Thursday on buying in auto & IT stocks. Pressure on metal stocks after the Cabinet cleared the new Mines Bill, which seeks mining companies to share profit with project-impacted people, pushed the market down on Friday.

The Sensex gained 292 points to close the week at 16,454 and the Nifty added 76 points to settle at 4,943. Economic events are likely to keep the Nifty in the range of 4,800 to 5,000.

In the sectoral space, BSE IT (up 6%) and BSE TECk (up 4%) were the top gainers, while BSE Metal (down 5%) and BSE Consumer Durables (down 4%) led the losers.

The top Sensex gainers were DLF (up 10%), Infosys, Jaiprakash Associates (up 8% each), Tata Motors (up 6%) and Reliance Industries (up 5%). The key losers were Coal India (down 9%), Sterlite Industries (down 7%), Larsen & Toubro (down 6%), Hero MotoCorp (down 5%) and Tata Steel (down 4%).

Among Nifty stocks, DLF (up 11%), Ranbaxy Laboratories (up 9%), Infosys, Jaiprakash Associates (up 8% each) and Tata Motors (up 6%) were the major gainers. The main losers were Reliance Capital (down 22%), Reliance Infrastructure (down 13%), Reliance Communications (down 9%), Sterlite Industries (down 7%) and Larsen & Toubro (down 6%).

Rising prices of essential kitchen items like potato and pulses pushed food inflation closer to the double-digit mark at 9.13% for the week ended 17th September from 8.84% in the previous week. Finance minister Pranab Mukherjee termed the rise in food inflation as 'grave'.

Also, finance and revenue secretary RS Gujral raised concerns over the dip in direct tax collection growth, saying it was indicative of a 'slowdown in the economy'. The overall advance tax collections are estimated to have grown by 12% in the September quarter against the Budget target of 19%. For the top 100 companies, the growth was a modest 9.9%. Other analysts have also expressed concerns that weakening global economic environment and repeated rate hikes by the Reserve Bank of India (RBI) in its quest to tame the uncomfortable inflation number are having an adverse impact on the economy.

On the international front, Germany has completed its ratification of the expanded euro-zone bailout fund with both houses of the German parliament endorsing the plan designed to stop the sovereign debt crisis spreading in the 17-nation euro area. The approval paves the way to increase the size of the European Financial Stability Facility (EFSF) to 780 billion euro from the present level of 440 billion euro.

Meanwhile, St Louis Federal Reserve president James Bullard said the Fed is ready to ease its monetary policy should the US economy weaken, while keeping an eye on inflation risks. The US economy is facing a serious crisis with the jobless rate at around 9% since April 2009. The economy lost momentum in August as consumer spending declined and incomes unexpectedly dropped for the first time in almost two years.


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