Headed lower: Weekly market report

Events over the next few days will influence the indices

Concern over another possible rate hike by the Reserve Bank of India at its monetary policy review on 16th September and the indecisiveness of the US Federal Reserve to detail a new package to stimulate growth in the US led to a flat closing of the market this week. However, the positive bias ensured a green close for the second straight week.

The dismal US jobs data published last weekend pulled the market lower on the first trading day of the week. Positive economic news on the domestic front pushed the indices higher on Tuesday. Institutional buying support helped the market close in the green for yet another day. Gains in the European markets saw the domestic market close higher on Thursday. However, traders turned cautious on Friday on account of US worries and the market closed down. The Sensex closed at 16,867, a gain of 46 points for the week, and the Nifty settled at 5,059 with an overall gain of 19 points.

The Nifty is at a position where the direction of the market will likely be determined by the happenings over the next few days.

In the sectoral space, the BSE Consumer Durables surged 5% and BSE Capital Goods gained 3%, while the BSE TECk and BSE Metal both lost 1%.

The key Sensex gainers during the week were Jaiprakash Associates (up 9%), Hero MotoCorp (up 7%), Larsen & Toubro (up 5%), Hindustan Unilever (up 4%) and Mahindra & Mahindra (up 3%). The main losers were Sun Pharma, DLF (down 4% each), ITC, Hindalco Industries (down 3% each) and Tata Steel (down 2%).

The top performers on the Nifty were JP Associates (up 9%), Hero MotoCorp (up 7%), Punjab National Bank (up 6%), L&T and Ranbaxy (up 5% each). Sun Pharma (down 5%), DLF (down 4%), Reliance Power, Power Grid Corporation and Hindalco (down 3% each) were the major losers.

According to the Society of Indian Automobile Manufacturers (SIAM), domestic passenger car sales declined by 10.08% in August 2011 to 144,516 units, from 160,713 units in the corresponding month a year ago. Motorcycle sales grew by 15.43% in the month to 839,772 units from 727,542 units in the corresponding month last year. Total sales of vehicles across categories registered a growth of 11.85% to 1,412,945 units in August, as against 1,263,239 units in the month last year.

Food inflation fell to 9.55% for the week ended 27th August, down from 10.05% in the previous week. The finance minister has expressed the hope that the rise in food prices would moderate further after the end of the festive season.

India's exports grew by annual 44.2% to $24.3 billion in August, showing an impressive year-on-year expansion, but the commerce ministry clearly sees "difficulties down the road", making out a case for stimulus to exporters.

Disclosing the monthly trade trends, commerce secretary Rahul Khullar said merchandise shipments for August looked quite good, compared to August last year. But the correct way, he said, would be to compare the August performance with that of July when exports grew by a whopping 82%. Mr Khullar said, month-on-month, the consignments were down 17% in August from July. The good annualised showing was on the back of the low base of comparison, he pointed out.

Global ratings agency Moody's has pegged India's growth at 7.5%-8% for the current fiscal, saying that higher interest rates and global economic uncertainties could affect economic expansion in the near term. In its annual sovereign credit update on India, Moody's, however, added that the 'cyclical slowdown' is unlikely to change its credit outlook for the country.

On the international front, top German official at the European Central Bank Juergen Stark resigned unexpectedly on Friday, in a conflict over the bank's policy of buying government bonds to combat the euro zone's debt crisis. While Mr Stark gave no public explanation for his resignation, he sent an article to the German financial daily Handelsblatt, for publication on Monday, in which he has said that the only solution to the debt crisis was for governments to cut spending.

Meanwhile, US Federal Reserve chairman Ben Bernanke has asserted the central bank's commitment to provide stimulus for the sagging US economy, but he offered no specific promises or details about what action could be taken. He also repeated his call for Congress and the White House to implement proper fiscal measures to control the national debt and the budget deficit.


Nifty hits projected weekly R1 level and corrects; consolidation likely

Consolidation is necessary before we can see any significant recovery, like the one we witnessed in the last couple of weeks. It’s better to be stock specific then

S&P Nifty close: 5059.45

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

The Nifty opened weak and declined further, but made a higher bottom on the daily chart as was envisaged. Buying at lower levels, coupled with short covering, saw the Nifty gain sharply and hit a high of 5169.25 points. Then profit-booking, together with speculative selling, saw the gains evaporate. Volumes were significantly higher and trading was volatile. The Nifty closed with a meagre 19-points gain (+0.39%) this week. The sectoral indices that led the advance were BSE CDS (+5.01%), BSE Auto (+2.12%) and BSE Bankex (+1.35%), whereas BSE Teck (-1.06%), BSE Metal (-0.99%) and BSE IT (+2.83%) underperformed the benchmark.

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 have paid heed to our opinion to cover shorts, as well as go long, over the past couple of weeks, would have benefited handsomely as the Nifty has rallied nearly 10% from the lows.

Here are some key levels to watch out for in the week ahead.

  • As long as the S&P Nifty holds above 5,057 points (pivot) the bears will be under pressure.
  •  Support levels in declines are pegged at 4,945 and 4,831 points.
  •  If the S&P Nifty holds above the 5,057 points level in close, in any correction, it could rise further to 5,171 or 5,283 points.

Some observations

The bulls have succeeded in putting a foot in the door of the bear juggernaut, but they will have to ensure that the recent low holds in any corrections that may happen from here on. On the support levels,

1.    The Fibonacci retracement levels of the recent rise from 4,720 to 5,169 points are 4,997 (38.2%), 4,944 (50%) and 4,891 (61.8%). These should act as supports in dips.

2.    Resistance in any further rise will be provided by the "gap area" between 5,229 and 5,323 points.

3.    Only a close of the "gap area" could lead to the foundation of a retracement of the entire fall from 6,338 to 4,720 points, though no confirmation is available as yet despite last week's recovery.


The bulls succeeded in defending the 50% retracement level (4,916 points) of the rise from 4,720 to 5,113 points which resulted in speculative buying as well as short covering, taking the Nifty up to 5,169 points. If the Nifty holds the above stated retracement levels in the declines, then further upside is likely in the weeks ahead which could take the Nifty to 5,230 (50%) and 5,350 (61.8%) retracement of the decline from 5,740 to 4,720 points.

The bulls have to wait for the Nifty to venture into oversold territory on the daily charts before venturing back in, but keeping in mind that we are in a corrective rise only. Some consolidation is required before we can see any significant recovery, like the one we witnessed in the last couple of weeks. It's better to be stock specific then. We will likely see high volatility on the next weekend too.

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


Back home in Ralegan Siddhi, Anna Hazare continues to instruct visitors on reforms

Anna’s hometown is slowly turning into a centre of learning for people flocking there to hear the Gandhian, who has revived their hopes to build a new India

Senior engineers of the Swedish company Hoganas, Michael Johansson and B Bengtsson, took a detour on their way to Pune, from Ahmednagar (where the Hoganas factory is located) to meet Anna Hazare at Ralegan Siddhi. The otherwise 'model' village that has quietly thrived in undertaking exemplary water conservation and harmonious community living, has metamorphosed into the nerve centre of national news, since Anna's historic hunger protest at the Ramlila Grounds in Delhi for a strong anti-corruption bill gathered support nationwide.

Johansson, who is an avid fan of Mahatma Gandhi, having read books and watched several films on the leader and his activity, says enthusiastically, "Anna is a great man and has nice thoughts. I got interested in him when I saw him on Swedish television channels. I have traveled to several countries and have seen that corruption is one of the main reasons holding them back from making proper progress.

"I was fascinated to see Anna's movement which was totally peacefully and for a cause that is a major concern for India. Anna has shown that you can have a nationwide campaign on this issue without a stone being thrown at anyone. I think the world should follow this sterling example of non-violent agitation.'' How does he see the future of this movement? Says Johansson optimistically, "I hope it will have the necessary impact.''

The first visible sign of attention are the OB media vans at the gates of Ralegan Siddhi, and TV journalists nosing around for a new angle in the Anna story. Some weeks ago, one would have found bullock carts parked here, or villagers talking casually by the wayside. "He doesn't meet us these days. Please take an appointment for us," pleads a TV correspondent. Suddenly, a large group of youngsters dressed in blazers descends from the bus. Some of them wear the popular "I am Anna" caps that have become synonymous with the nationwide campaign for the Jan Lokpal Bill.

anna talking with youngsters

Back in the village, Anna resides in one of the rooms of the newly-constructed hostel at the Devi Temple. The expansive banyan tree and lush greenery all about give it a heritage setting.

Visitors from all parts of the country flock to Ralegan and yearn for a glimpse of Anna, who has become the symbol of purity and justice.

"I want to meet Anna for just five minutes,'' says one young man, displaying a bouquet of flowers that he has brought along to present to the leader. Another man has brough his three-year-old son along: "He has been seeing Anna on TV. Now he wants to receive his blessings."

Anna's helpers, Suresh Pathare and Anil Sharma, have a tough balancing act. "Anna meets visitors at 11am, 1pm and 4pm," they inform the people gathered about. They don't mind waiting. At about 11.30, Anna walks towards the crowd. Two security men swing open the grill and request the crowd to sit down. Mobile cameras flash, many are switched to video mode. Anna talks to the people, beginning with some points that he made in his speeches at the Ramlila. "Build your families, your wealth, your career, and keep some time for nation building." Youngsters nod in appreciation.

anna looking at the frame

As Anna winds up his exchange and turns back to go to his room, I follow after him. "The most excruciating experience at Ramlila Grounds was the lies that our political leaders indulge in, so brazenly. I am so worried-what will happen to the future of this country if we have such untruthful leaders?'' he says, his eyes reflecting the pain.

But in the next moment they light up: "Something good has come out of it. Earlier, the common man used to think, 'I have no power, I have no money-how can I fight the government?' Now he knows that if he has the desire, the determination, the passion and the faith, he can take on those in power. He knows now that he is an important entity in a democracy."

I wanted to begin my series of interviews with him for the authorised biography on Anna that I am writing. He smiles and says, "I am still feeling weak. I have not recovered completely. Can we talk a couple of days later?'' 'Sure', I said.

anna raking sweedish engineer

Still, I sat around to listen and learn from what is going on. When the Swedish engineers sat down to talk to Anna, he said, "I am proud that the revolution has not been bloody. The person who is doing it has to suffer so that he can spread the message of peace and justice far and wide. The world has become polluted, but there still can be a change. We need a change in leadership-leaders with good character, good thought, the ability to sacrifice and bear humiliation. The leader should be able to pick up a broom and do any menial work too-but leaders these days have big egos and that's the biggest pitfall."

The next visitors bring along a large-sized photo frame of Anna during his fast at Ramlila Grounds… the exchanges and the instructions continue with people who have come to learn Anna "by heart". For Anna, each of them is an epitome of the new struggle of freedom from corruption.

PS: A two-day meeting of the core committee of Team Anna will be held in Ralegan Siddhi this weekend to discuss further strategy in the campaign against corruption. Arvind Kejriwal, Kiran Bedi and Prashant Bhushan are expected to attend the meeting along with Anna Hazare.



Narendra Doshi

5 years ago

Dear Vinita,
I hope you will be able to keep up periodic reporting of this movement, for the Moneylife readers.

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