High volatility is likely at the beginning of the week, as well as the following week, which would provide good opportunities for short-term traders
S&P Nifty close: 5072.95
SHORT term: Down MEDIUM term: Down LONG term: Up
We saw the Nifty open with a big downside gap at the start of the week, and fall further to an intra-week low of 4,946 points, from where it recovered on short covering as well as some speculative buying. Despite the Nifty losing 139 points (or down 2.65%), the weekly candlestick chart shows a "high wave line" pattern which denotes "equilibrium" between the bulls and the bears.
Volumes were significantly higher and volatility extremely high. The sectoral indices which led the decline were BSE IT (-8.32%), BSE Teck (-7.49%), BSE Metal (-5.38%) and BSE Reality (-4.30%), while those which outperformed were BSE Auto (+2.67%) and BSE CDS (-0.06%).
The Histogram MACD continues to be below the median line as the trend is down. We saw the Nifty dip below the 150wema and close marginally above it during the week, raising some hopes of a recovery. However, the bears have gained the upper hand and rallies will meet with selling pressure.
The S&P Nifty hit the 50% retracement (5,127 points) of the rise from 3,918 to 6,335 points and the 61.8% retracement level is pegged at 4,842 points, which should be a crucial support in future. From the low of 2,539 to the high of 6,335, the 38.2% retracement level is pegged at 4,885 points. Therefore, there is strong support pegged just below the 4,900 points mark 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 at lower levels, especially if the Nifty dips to sub 4,900 points level. The reasons for this are that,
1. We have completed five weeks (Fibonacci number) of decline from the recent high of 5,740 points.
2. We've also completed 18 weeks (Lucas number) from the high of 5,944 points.
3. And it is seven weeks (Lucas number) since the recent low of 5,195 points.
The coming week could begin with high volatility as the bulls and bears try to fight for short-term control (due to the high wave line pattern).
As a result of the retracement levels and other observations, there is a high probability that we could see a short-term bottom established this week or at the beginning of the following week. Therefore, those short should cover their positions in any further decline, as there is strong support pegged below the 4,900 points level. High volatility is likely at the beginning of the week, as well as the next week, which would provide good opportunities for short-term traders, provided they are nimble-footed.
(Vidur Pendharkar works as a consultant technical analyst and chief strategist, www.trend4casting.com.)
There are no signs of buyers. Nifty may hit 4,800
The US rating downgrade over the previous weekend raised the fear of a repeat of the recession in the world's largest economy that put pressure on global markets. The ever-widening debt problems in Eurozone countries and a mixed bag of corporate results and economic indicators on the domestic front caused a 3% loss on the market this week, the third successive weekly drop.
Credit rating agency S&P downgraded the credit rating of the US from 'AAA' to 'AA+' on 5th August, which sparked concerns over growth of the economy and investors shied away from equities and took refuge in gold. Concerns that the debt crisis may engulf more European nations added to the worries.
The market suffered a deep cut on Monday, following the US rating cut. The indices recovered nearly half the losses the following day, although they closed in the red for a sixth consecutive day. Positive comments from the US Federal Reserve boosted sentiment, and helped the market snap a losing streak to close with gains on Wednesday. However, the market could not sustain the gains and closed lower on the last two days of the week.
Overall, the Sensex declined 466 points to 16,840 and the Nifty settled 138 points down at 5,073. The market could see a sharp fall if the Nifty breaks the support of 5,050. However, an upmove to 5,200 is possible if the support holds.
The BSE Auto index was the lone sectoral gainer (up 3%), while the BSE Consumer Durables index settled flat. BSE IT (down 8%) and BSE TECk (down 7%) were the top sectoral losers in the week.
Mahindra & Mahindra (up 13%), Hero MotoCorp (up 6%), Maruti Suzuki (up 5%), Bajaj Auto (up 4%) and NTPC (up 2%) were the major gainers on the Sensex. The top laggards were Tata Power (down 12%), Tata Steel (down 11%), TCS, Tata Motors (down 10% each) and Infosys (down 8%).
M&M (up 13%), Hero MotoCorp, Ambuja Cements (up 6% each), Maruti Suzuki (up 5%) and Kotak Mahindra Bank (up 4%) were the major Nifty gainers, while Tata Power, Reliance Power (down 12% each), Reliance Capital, Tata Steel (down 11% each) and TCS (down 10%) were the top losers on the index.
Industrial growth, as measured by the Index of Industrial Production (IIP), revived moderately to 8.8% in June 2011 on a smart recovery in the manufacturing and capital goods sectors. Growth in factory output stood at 7.4% in June last year. During the first quarter (April-June) of the current fiscal, IIP growth stood at 6.8%, as against 9.6% in the corresponding three-month period last year.
Food inflation jumped to a four-and-a-half month high of 9.9% during the week ended 30th July, from 8.04% in the previous week. This is the highest rate of price rise in food items since the week ended 12th March, when food inflation stood at 10.05%.
India's exports jumped by a record 81.8% year-on-year to $29.3 billion in July 2011 due to the sterling performance of sectors like engineering, petrochemical products and gems and jewellery. Imports, too, increased by 51.5% to $40.4 billion, resulting in a trade deficit of $11.1 billion. However, this high growth rate is unlikely to be sustained in the coming months due to uncertainty in the US and European economies, commerce secretary Rahul Khullar said.
On the global front, speculation that France could be the next target of rating agencies worsened the worries. But the French finance ministry 'formally' denied rumours that the country was heading for a downgrade of its prized 'AAA' credit rating.
Noted media man Paranjoy Guha Thakurta screens documentary on destructive illegal mining in Bellary at a programme hosted by Moneylife Foundation together with Awaaz Foundation
Independent journalist Paranjoy Guha Thakurta on Friday said that the mainstream media must do more to highlight the destructive illegal mining in the Bellary region of southern India's Karnataka state which has caused a much bigger loss to the country than even the 2G spectrum and licence scam.
"Unlike in the 2G spectrum allocation scam where the loss is notional, the loss due to illegal mining is actual and much bigger," he said. Mr Thakurta, who is a writer, educator, interviewer and commentator, pointed out that about two-third of the resources (iron ore) mined had gone out of the country and was therefore no recoverable.
Mr Thakurta was speaking at a special screening of his documentary film "Blood and Iron", about the destructive illegal mining in the Bellary region, for an interested gathering in Mumbai. The programme was organised at the KR Cama Hall by Moneylife Foundation together with Awaaz Foundation. The film which was made over the past year has been updated with the Supreme Court's latest order banning mining in Bellary and the resignation of BS Yeddyurappa as chief minister a fortnight ago.
The 96-minutes long film documents a story of greed and devastation, that has ravaged the region across Karnataka and adjoining Andhra Pradesh, through interviews with a range of individuals from a cross-section of society.
It talks about how exports from Bellary have enriched a privileged few, while the ordinary people are trying to eke out a living in the area, and how iron ore mining-much of it illegal-has resulted in large sections of the people living in abject poverty.
The documentary mentions the infamous Reddy brothers who were ministers in the Yeddyurappa government and have so far been untouched despite high-ranking authorities naming them for being involved in this illegal activity.
Post the screening of the film, a member of the audience referred to the ecological damage due to mining across the country saying there is a need for people to participate in the fight against this. Mr Thakurta agreed with the sentiment and said, "I have documented all the facts and presented it in my personal capacity."
To a question about the production of the film, he said the team that made the film had to be extremely cautious during the entire filming and he thanked the local people of the region for their support and their help. "We used the 'shoot and scoot' method. We never stayed at a hotel for more than a night. The film is also a result of the huge support from the local people, who gave in-depth inputs and analysis."
Another question was about the quantum of loss due to the illegal mining. Mr Thakurta said "the Justice Santosh Hegde report estimated that Rs16,000 crore has been lost. This figure is based on evidence available. But the loss could be much more as evidence for many other things may not be available."
On the matter of illegal mining and land laws, Mr Thakurta said that "even without the (Mining) Act, if the actual law is applied and followed, there would not be such a situation in Bellary and elsewhere."
Such illegal mining is active in Goa as well, but very little is reported about this in the media. "If I get enough resources, I would like to make a documentary showing two sides of Goa. One side is the 'tourist destination Goa' while the other is of the country side which has been devastated due to illegal mining," Mr Thakurta said.