Bulls fall just short of pushing the Nifty above the resistance line; only this can provide some impetus

The Bulls have to push the Nifty above the resistance line, or preferably the 5,670 level, on significantly higher volumes, for further upsides

S&P Nifty close: 5633.95

Market trend

SHORT term: Sideways        MEDIUM term: Sideways     LONG term: Up

The Bulls just fell short of pushing the Nifty above the crucial trendline resistance of 5,655 points (as mentioned last week) which would have resulted in providing the much-needed upside momentum.

After yet another see-saw week, the Nifty closed 52 points (+0.95%) higher. Volumes were flat. The sectoral indices which gained were BSE FMCG (+1.74%), BSE Teck (+1.90%) and BSE IT (+1.30%), while the underperformers were BSE CDS (-1.65%), BSE Health (-1.54%) and BSE Auto (-1.49%).

The sustained rise of the last few weeks has resulted in the Histogram MACD staying above the median line, implying that the intermediate term bias has turned sideways if not up at this moment. The Nifty seems to be retracing either the fall from 6,181 or the entire decline from 6,338 points, which gives upside targets of 5,767 (50% of 6,338-5,195 came very close to this), 5,804 (61.8% of 6,181-5,195) and 5,902 (61.8% of 6,338-5,195).

We saw the Nifty bounce after hitting the 20wema and almost hit the resistance line (in purple pegged at around 5,655 points) which has to be crossed for further upsides, otherwise the efforts of the last few weeks will come to naught. The Fibonacci retracement levels of the recent rise from 5,195-5,740 are 5,532 (38.2% already completed), 5,468 (50%) and 5,403 (61.8%), that are the support levels to watch out for in corrections. The trendline support pegged (in black) as depicted in the weekly chart above has moved up to 5,450 points, this week. A breach of this could see the Nifty fall to the 5,300-5,320 range at a fast clip.

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

  • As long as the S&P Nifty remains above 5,604 points (pivot) the Bulls have the advantage.
  •  Support levels are pegged at 5,562 and 5,491 points.
  •  If the S&P Nifty holds above the 5,604 points level in close, it could reach 5,675, 5,717 or 5,804 points.

Strategy
The Bulls have to push the Nifty above the resistance line (in purple) or preferably the 5,670 level, on significantly higher volumes, for further upsides. The stop loss on longs has moved up from 5,428 to 5,450 points this week. It is a breakpoint that the Bulls have at this moment and they have to capitalise on this, otherwise it will be back to deuce.

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

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IRDA for more cos to participate in pension market

"More than 90% of all the pensions are actually in the Life Insurance Corporation of India (LIC). There is such a huge concentration in one institution. I think that is a recipe for high risk. Therefore, we must build up mechanisms which allow other companies also to participate actively in the pension market," IRDA chairman, J Hari Narayan, said at an insurance summit in Mumbai

Mumbai: The Insurance Regulatory and Development Authority (IRDA) on Friday said that domination of one company in the pension market could be risky and it was important for other insurance companies to participate actively, reports PTI.

"There is a structural problem that will unwind for the regulator and the industry as a whole, and will affect the country. More than 90% of all the pensions are actually in the Life Insurance Corporation of India (LIC). There is such a huge concentration in one institution. I think that is a recipe for high risk," IRDA chairman, J Hari Narayan, said at an insurance summit here.

"I think it is too much of a risk to be allowed to continue. Therefore, we must build up mechanisms which allow other companies also to participate actively in the pension market," he added.

Mr Narayan further said that pension funds should offer life annuity and companies that sell pension products should have a guaranteed capital.

"I think at the very minimum that every product that is sold as a pension product should have a capital guarantee so that the principal is safe," he said.

Pension plans are estimated to account for about 30% of the life insurance industry's business.

Meanwhile, Mr Narayan said that the regulatory body was working towards creating an exchange for re-insurance, but did not divulge when the mechanism would be in place.

"We have tried to create a platform on re-insurance, which is more transparent and more like a re-insurance exchange. Initial work is going on. What we visualise is that all matters on re-insurance will be routed only through the exchange. The advantage will be that transactions are clear and there cannot be any glitches in terms of the fine print of the policy," he said.

Mr Narayan said the insurance industry was more like a teenager going through exciting times but said there were a few challenges that needed to be addressed.

He said in case of insurance firms floated by banks, the average cost of premium was higher than that of LIC. Though there are some recommendations to allow a bank to have stakes in two insurance firms, he did not agree with this, he said.

"The problem that I have in two insurance companies operating in the same space is the premium is perverse to the bank as to which product they will be selling at branch level.

The perverse incentive at branch level is not correct. And I don't think that is a healthy practice. We cannot be having two across the same space," he said.

Mr Narayan pointed out that banks have huge potential to market insurance products.

"From the 80,000 branches across India, only 7,000 sell insurance policies. The bulk of the branches have not been used for selling insurance. We will be failing in our duty, certainly as a regulator, if we don't enable the greater use of the branch outreach," he said.

On distribution front he said that many agents were not happy as the pay was low, but said it was not possible to increase the commission.

"Is it wise to so largely front load commission? Should we look at flattening the commission differentials? At present, we cannot assess it because we are bound by the present Insurance Act," he said, adding that the amendment bill if passed could bring about some changes.

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Cabinet approves BP buying stake in RIL’s 21 blocks

RIL had on 21st February agreed to sell 30% stake in 23 out of its 29 oil and gas blocks to London-based BP Plc for $7.2 billion, and may get an additional $1.8 billion if the two explorers find more hydrocarbons

New Delhi: After nearly five months wait, the government today cleared UK's BP Plc buying 30% stake in most of Reliance Industries' (RIL) oil and gas blocks, including the showpiece KG-D6 gas fields, for $7.2 billion, reports PTI.

The Cabinet Committee on Economic Affairs (CCEA), headed by prime minister Manmohan Singh, today approved BP buying stake in RIL's 21 blocks, sources said.

The CCEA could not meet on its scheduled day yesterday as the oil ministry had not circulated the agenda in time.

RIL, India's most valuable company, had on 21st February agreed to sell 30% stake in 23 out of its 29 oil and gas blocks to London-based BP Plc for $7.2 billion, and may get an additional $1.8 billion if the two explorers find more hydrocarbons.

The CCEA approved sale of stake only 21 blocks as exploration status in the two remaining blocks was in dispute.

BP will have to furnish a bank guarantee and performance guarantee as has been prescribed under the production sharing contract.

The deal, which may increase to $20 billion with future performance payments and investment, will give RIL access to BP's expertise in deep-water drilling and accelerate development and production at its fields particularly the under-performing eastern offshore KG-D6.

For BP, which has been struggling to battle back from the disastrous Gulf of Mexico oil-spill disaster last year, the transaction is a chance to enter a market where energy demand is growing at 5%-8%.

Officials said RIL had on 25th February applied for government nod for the stake sale. The New Exploration Licensing Policy, under which RIL had won the oil and gas blocks, allowed for sale or assignment of participating interest (farm-out), which is routinely approved by the oil ministry.

But the ministry, even though competent to approve the deal, decided to refer it to the CCEA.

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