Bulls have to defend 4,720 as well as ensure crossing of 5,168 points to carry the battle further

If the Nifty fails to hold the recent low of 4,726 points, there will be doubts about the strength of this recovery and the distance it could go

S&P Nifty close: 4,867.75




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


The Nifty opened a tad lower and rallied in the first half of the week, but it failed to take out the week before the last high of 5,169 points. After hitting a high of 5,168 points (R1 was 5,181 points) the Nifty fell sharply on profit-taking as well as speculative selling to hit a low of 4,829 points (S1 was 4,813 points).

Volatility was high during the weekend (which was a bit surprising, considering that the volatility of the previous two weeks was also high), due to the meltdown in international markets. The Nifty crashed 217 points, (-4.26%) lower-as the bulls caught the flu from the cold weather in global financial markets. Volumes were lower during the fall. The sectoral indices which outperformed were BSE CDS (+0.54%), BSE Healthcare (-1.91%), and BSE IT (-2.28%) while the ones which underperformed were BSE CGS (-7.35%), BSE Metal (-5.99%) and BSE Oil & Gas (-5.55%). 

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. Those who paid heed to our warning in the strategy for last week of a swift move in the direction of the break above/below the 5,144/5,068 levels must have been saved the jitters.

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

  • As long as the S&P Nifty stays below 4,955 points (pivot) the bulls will be under pressure.
  • Support levels in declines are pegged at 4,742 and 4,616 points.
  • If the S&P Nifty crosses and sustains above 4,955 points in any rise, it could move up further to 5,080 or 5,294 points.

Some Observations:
The efforts of the bulls in the past four weeks almost came to naught last week. Now it is imperative that they defend the low of 4,720 points if they want to make any serious attempt to close the "gap" area mentioned below.

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 4,726 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 5,168 points will signal that the upside in the market is capped in the 5,350-5,500 range in this corrective rise.

5.    If the Nifty closes the gap area mentioned above in the coming week or two, then the probability of this corrective rise reaching the 5,530-5,720 range in the first quarter of next year would increase.

Strategy
The bulls have to defend the recent low of 4,720 points to keep their hopes alive. High volatility is expected around 27th-28th September (a day or two prior to this F&O settlement expiry). Only a crossing of the recent high of 5,168 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. An acid test lies ahead of the bulls at the beginning of the week as well as the dates mentioned above.

(Vidur Pendharkar works as a consultant technical analyst and chief strategist at www.trend4casting.com).
 

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COMMENTS

Prakash

6 years ago

This analysis seems to indecisive and vague.Moneylife team has better and cleat view. for example

" The Nifty not being able to cross the recent high of 5,168 points will signal that the upside in the market is capped in the 5,350-5,500 range in this corrective rise."

How to interpret that if dont go above 5168 than off course upside capped at 5170

Prem

6 years ago

Many are under presumptions that there are bulls and bears in market, but interestingly there are no bulls or bears. The same people move the market up and down.

TRAI to look into 3G roaming pacts of leading telcos

In July this year, Vodafone, Bharti Airtel and Idea Cellular had entered into a bilateral roaming agreement, both inter and intra circle, to provide 3G services to customers in the circles where they cannot build their own 3G network as they do not have the licence, in order to bring a pan-India experience of 3G services to their users

New Delhi: The Telecom Regulatory Authority of India (TRAI) has sought information from leading service providers on their bilateral agreements for entering into third generation (3G) roaming pacts, to ensure that there is no violation of licence terms and conditions, reports PTI.

"TRAI is investigating into 3G roaming agreements of telecom operators," a source in the regulator body said.

The watchdog is looking at as to how these companies are selling their 3G spectrum services under the agreement, TRAI sources said.

Earlier, Department of Telecom (DoT) had also raised doubts over 3G roaming pacts of companies, which are not having 3G services on pan-India basis. The pacts help them reduce cost.

In July this year, in an effort to reduce cost and offer pan-India 3G services, Vodafone, Bharti Airtel and Idea Cellular had started sharing their networks to provide seamless service to their customers.

These companies had entered into a bilateral roaming agreement, both inter and intra circle, to provide 3G services to customers in the circles where they cannot build their own 3G network as they do not have the licence, in order to bring a pan-India experience of 3G services to their users.

Airtel, Aircel and Reliance Communications each own 3G spectrum licence in 13 of the 22 telecom circles, while Vodafone has it in 10 circles and Idea and the Tatas in nine circles.

Bharti Airtel had bagged 3G licence for Delhi and Mumbai metros besides states like Andhra Pradesh, Karnataka, Tamil Nadu, Uttar Pradesh (West), Rajasthan, West Bengal, Himachal Pradesh, Bihar, North East, Jammu and Kashmir and Assam.

Idea Cellular holds 3G spectrum for 10 telecom circles-Maharashtra & Goa, Gujarat, Andhra Pradesh, Madhya Pradesh & Chhattisgarh, Himachal Pradesh, UP (East) UP (West), Punjab, Haryana and Kerala.

Vodafone Essar had acquired 3G spectrum in 10 circles including Delhi, Mumbai, Chennai, Kolkata, Maharashtra, Gujarat, Tamil Nadu, Haryana, Uttar Pradesh (E) and West Bengal.

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Share prices may see weak recovery: Friday Closing Report

Nifty may see a small bounce-back after hitting 4,800 but more selling likely

The events of Wednesday still played on investors' minds resulting in the market closing lower for the third day in a row. The Nifty today closed 56 points down at 4,868, which is very close to the level of 4,800; it also crossed its first level of support at 4,900. We may expect a small bounce-back from here. The NSE fell on a volume of 64.32 crore shares which was above its 10-day moving average.

The market continued its downtrend today on weak global cues on fresh worries that the global slowdown would lead to another recession. The Nifty opened 50 points lower at 4,874 and the Sensex started the day at 16,222, down 139 points from its previous close. All sectoral gauges, led by metal, realty and banking, were in the red. Choppiness persisted in the entire session with the indices fluctuating in the negative terrain.

The market fell to the day's lows in late-morning trade with the Nifty dipping to 4,929 and the Sensex going back to 16,052. However, bargain hunting lured investors to lap up stocks at lower levels, thus pushing the indices higher.

The market ventured into the green for a brief moment, which also marked the intraday highs for the benchmarks. At the highs, the Nifty touched 4,929 and the Sensex rose to 16,368. But choppiness capped the gains leading the indices back into the red.

A positive opening of the European bourses after the recent bashing also soothed investors' nerves back here. But with the European markets paring early gains, the domestic indices closed down, lower for the third day in a row. Finally, the Nifty fell by 56 points to settle at 4,868 and the Sensex closed at 16,162, a cut of 199 points.

The advance-decline ratio on the National Stock Exchange (NSE) was a negative 503:1186.

Among the broader markets, the BSE Mid-cap index fell 0.84% and the BSE Small-cap index declined 1.13%.

Barring the BSE Fast Moving Consumer Goods index (up 0.15%), all other sectoral gauges settled lower. The top losers were BSE Metal (down 2.28%), BSE Capital Goods (down 1.84%), BSE Auto (down1.59%), BSE Consumer Durables (down 1.44%) and BSE Bankex (down 1.35%).

The key gainers on the Sensex were Cipla (up 2.09%), Tata Power (up 1.37%), State Bank of India (up 1.03%), Bharti Airtel (up 0.77%) and Jaiprakash Associates (up 0.67%).  The laggards were led by Tata Motors (down 4.81%), Hindalco Industries (down 3.77%), HDFC Bank (down 3.10%), HDFC (down 2.82%) and Larsen & Toubro (down 2.70%).

The Nifty leaders were Reliance Power (up 3.37%), Cipla (up 2.09%), Grasim (up 2.02%), Reliance Capital (up 1.61%) and Tata Power (up 1.47%). Tata Motors (down 5.37%), Hindalco Ind (down 4.02%), SAIL (down 3.48%), HDFC Bank (down 3.45%) and Cairn India (down 3.42%) settled at the bottom of the index.

Recent negative developments in the US and the ongoing debt crisis in Europe pulled down the markets in Asia again today. Comments from finance ministers and central bankers from the Group of Twenty (G-20) nations that they would take steps to stabilise the global financial system did not help matters, either.

The Shanghai Composite declined 2.78%, the Hang Seng slipped 1.36%, the KLSE Composite contracted by 1.58%, the Straits Times fell 0.80%, the Seoul Composite tumbled 5.73% and the Taiwan Weighted settled 3.55% lower. Bucking the trend, the Jakarta Composite gained 1.70%. Markets in Japan were closed for a local holiday.

Back home, foreign institutional investors pulled out a huge Rs1,305.55 crore from the equities segment on Thursday. On the other hand, domestic institutional investors were net buyers of shares worth Rs743.47 crore.

Farm equipment major Mahindra & Mahindra (M&M) on Thursday said it would raise tractor prices by 1.5% soon in the wake of spiralling input costs. Asserting that the company has not been passing on the full impact of rising cost by absorbing major portion of rise in cost, M&M chief executive, Tractor and Farm Mechanization Business, Bishwambhar Mishra said that there was now need to pass on some portion of cost to consumers by raising rates of tractors. The stock settled at Rs777.70, down 0.75% on the NSE.

Diversified PSU Balmer Lawrie & Co today said it will make a foray into the Rs1,800 crore construction chemical business and plans to use Chinese technology for this purpose. The company has invested Rs3 crore on establishing construction chemicals capacities at its Chennai facility and trial production has begun. The stock declined 1.22% to close at Rs618.10 on the NSE.

Hindustan Petroleum Corporation has earmarked capital expenditure of Rs 45,000 crore over the next six years. Of this, Rs32,000 crore will go towards setting up new refineries and expanding existing ones. The balance will be spent on exploration & production, gas distribution, tankages, pipelines and retail infrastructure. The stock was down 0.84% to Rs370.20 on the NSE.

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