Market to move sideways till Nifty reaches 5,520
The market ended in the red this week after three weeks of gains. The decline was mainly due to global factors and lower expectations on first quarter results. Lower industrial output for May weighed down by the manufacturing and mining sectors was also contributed to the decline.
The market closed lower for the first two days on weak global sentiments. Institutional buying support and firm Asian markets helped the indices close in the positive on Wednesday. Poor inflation numbers led to a flat close on Thursday. While the market opened in the green on Friday, it lost direction and ended lower, as investors were concerned that rising inflation will prompt the Reserve Bank of India (RBI) to hike rates at its review meeting at the end of the month.
Overall, the Sensex fell 2% (down 296 points) to close the week at 18,561 and the Nifty shed 1% (down 56 points) to 5,581. We expect the market to move sideways in the days to come until the Nifty reaches 5,520.
BSE Healthcare and BSE Oil and Gas (up 1% each) were the top sectoral gainers, while BSE IT (down 6%) and BSE TECk (down 5%) were the major sectoral losers.
The main gainers on the Sensex were Reliance Industries (up 2%), ONGC and ITC (up 1% each). Infosys (down 8%), Hindalco Industries (down 6%), Jaiprakash Associates, Hero Honda and Wipro (down 4% each) were the top losers in the index.
The major gainers on the Nifty were IDFC, Dr Reddy's, Sesa Goa (up 3% each), Reliance Industries and Kotak Mahindra Bank (up 2% each). On the negative side, Infosys (down 8%), Hindalco (down 6%), SAIL, Jaiprakash Associates and Hero Honda (down 4% each) ended at the bottom of the index.
The country's industrial growth fell to 5.6% in May, the slowest in nine months, from 8.5% in the corresponding period a year ago, mainly due to poor performance of the manufacturing and mining sectors. The latest data is further confirmation that high inflation and a tight monetary policy by the RBI are putting the brakes on economic growth.
With inflation hovering at about 9%, it is widely expected that the central bank will hike rates further this month, which if implemented would be the 11th increase since March 2010. The recent rise in fuel prices is also expected to push inflation up further.
Headline inflation rose to 9.44% in June due to rising prices of fuel and manufactured products. Inflation, as measured by the Wholesale Price Index, stood at 9.06% in May and was 10.25% in June 2010. The rise in inflation can partly be attributed to the hike in prices of diesel, cooking gas and kerosene announced by the government on 24th May.
Snapping a two-week declining trend, food inflation for the week ended 2nd July rose to 8.31% on the back of soaring prices of protein-based items, cereals and vegetables. Food inflation rose by 0.70 percentage points during the week under review from 7.61% in the previous week ended 25th June.
Among corporates, Infosys on Tuesday announced a 15.72% increase in consolidated net profit to Rs1,722 crore for the first quarter ended 30 June 2011, over the Rs1,488 crore in the previous corresponding period. The company maintained its full-year dollar revenue forecast of 18%-20%, which was lower than analysts' expectations. The company's performance has been hurt by wage hikes and intense competition from rivals such as Tata Consultancy Services, IBM and Accenture. This highlights the prevailing global economic uncertainty and concerns about top management changes the company has been undertaking recently.
Tata Consultancy Services (TCS) on Thursday posted a 26.7% rise in its net profit at Rs2,415 crore for the first quarter of FY11-12. Revenue grew by 31.4% to Rs10,797 crore for the period under review, the company said. However, sequentially the profit has declined from the Rs2,623 crore profit in the last quarter of the previous fiscal.
On the global front, a top official of Standard & Poor's on Thursday expressed concern that the US faces the risk of losing its AAA credit rating in the next three months, even if lawmakers reach an agreement to raise the country's debt ceiling later this month. The House of Representatives is to vote next week on a plan to raise the debt ceiling with equal cuts. Five rounds of talks this week still produced no agreement, with the talks likely to resume over the weekend.
Eight banks, including two Greek banks, five Spanish banks and one Austrian bank have failed the European Banking Authority's (EBA) stress tests. The market's expectations for the stress tests were low, with many investors and analysts saying that unless they proved to be very strict, they would fail to boost confidence in the European policy response to the crisis, and could cause the sovereign crisis to spill over into a banking one.
In a related development, Italy's parliament on Friday gave definitive approval to a 48 billion euro austerity package aimed at averting a full-scale financial crisis, but there were growing questions about the government's capacity for further reforms.
The Bears are trying to fight back, but as long as this correction does not break the 5,400 level on a weekend close, the Bulls hold the edge. It is to be seen whether they will capitalise on it
S&P Nifty close: 5581.10
SHORT term: Sideways MEDIUM term: Sideways LONG term: Up
With the Nifty failing to hold above 5,670 points (which we mentioned last week) the market dipped in the first half of the week to between the 38.2%-50% retracement (5,468-5,532 points) levels of the rise from 5,195-5,740 points. The Nifty managed to recover some of its losses, but ended the week 79 points (-1.41%) lower. Volumes were significantly lower during the week. The sectoral indices which led the decline were BSE IT (-5.53%), BSE Teck (-4.51%), BSE Metal (-2.36%) and BSE Realty (-1.89%), while the BSE Health (+1.26%), BSE Oil & Gas (+1.12%) and BSE PSU (-0.18%) outperformed.
The sustained rise of the last few weeks has resulted in the Histogram MACD moving 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 close marginally below the 20wema pegged at 5,587 points this week as a result of which the Bulls have to take immediate action to push it above this as well as above the resistance line (in purple pegged around 5,655 points) 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%), 5,468 (50%) and 5,403 (61.8%) and these are also the support levels to watch out for in corrections. The trendline support (depicted in black in the weekly chart above) is pegged around 5,428 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.
The Bears are trying to fight back, but as long as this correction does not break the 5,400 points level on a weekend close, the Bulls hold the edge and the Nifty should try to attempt the 5,804 or 5,902 levels in the weeks ahead. For this to materialize the Bulls have to push the Nifty above the resistance line (in purple) on significantly higher volumes.
In a nutshell, the range seems to have contracted further between the 5,428 (trendline support) and 5,655 (resistance line in purple) and a break-out from this range would provide some impetus in the direction of the break. Its advantage Bulls at the moment, but it is to be seen whether they will capitalise on it.
(Vidur Pendharkar is a consultant technical analyst and chief strategist at www.trend4casting.com.)
Of the 121 crore Indians, 83.3 crore live in rural areas while 37.7 crore stay in urban areas, said the Census of India's 2011 provisional population totals of rural-urban distribution in the country, released by Union home secretary RK Singh
New Delhi: Nearly 70% of the country's population lives in rural areas where, for the first time since independence, the overall growth rate of population has sharply declined, according to the latest census, reports PTI.
Of the 121 crore Indians, 83.3 crore live in rural areas while 37.7 crore stay in urban areas, said the Census of India's 2011 provisional population totals of rural-urban distribution in the country, released by Union home secretary RK Singh.
"For the first time since independence, the absolute increase in population is more in urban areas than in rural areas. The rural-urban distribution is 68.84% and 31.16% respectively," Registrar General of India and census commissioner C Chandramouli said.
The level of urbanisation increased from 27.81% in the 2001 census to 31.16% in the 2011 census, while the proportion of rural population declined from 72.19% to 68.84%.
"The slowing down of the overall growth rate of population is due to the sharp decline in the growth rate in rural areas, while the growth rate in urban areas remains almost the same," Mr Chandramouli said.
However, according to the report, the number of births in rural areas have increased by nine crore in the last decade.
The statistics reveal that while the maximum number of people living in rural areas in a particular state is 15.5 crore in Uttar Pradesh, Mumbai tops the list having the maximum number of people in urban areas at 5 crore.
The data also reflects that 18.62% of the country's rural population lives in Uttar Pradesh and 13.48% urban population lives in Maharashtra.
During 2001-11, the rate of growth of rural population has been 12.18%. The growth of the country's rural population is steadily declining since 1991, the report said.
Meghalaya (27%) and Bihar (24%) witnessed the largest growth in population among states in the past decade. Four states that recorded a decline in the rural population during 2001-11 are Kerala (by 26%), Goa (19%), Nagaland (15%) and Sikkim (5%).
Though the growth rate of population in rural areas of Empowered Action Group (EAG) states is nearly three times that in rural areas in non EAG states, it is for the first time that significant fall of growth rate is seen in the rural areas of EAG states.
The EAG states are Rajasthan, Uttar Pradesh, Uttarakhand, Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh and Orissa.
According to the report, though the urban child sex ratio is far worse than that in rural areas, the fall in child sex ratio in rural areas is around four times that in urban areas.
However, the decline in the child sex ratio is more gradual in urban areas, the report said.
There is a decline of 8.9 million children in rural areas while urban areas have shown increase of 3.9 million children.
The data shows there is an increase in the overall sex ratio in the country from 933 in 2001 to 940 in 2011. However, the improvement in the overall sex ratio is largely in urban areas.
In rural areas in the country there has been an increase by only 1 point from 946 in 2001 to 947 in 2011. In urban areas there has been an appreciable gain of 26 points from 900 in 2001 to 926 in 2011.
In 10 states and UTs, the urban sex ratio is higher than the rural sex ratio in Census 2011. This includes Tamil Nadu, Kerala and National Capital Territory of Delhi, the report said.
The report said the child population in the country declined by 5 million or almost 3% between 2001 and 2011. This is due to the sharp decline of 8.9 million or about 7% in the child population in rural areas.
In urban areas, the child population increased by 3.9 million or about 10%.
The improvement in the literacy rate in rural areas is two times than that in urban areas
The rural-urban literacy gap which was 21.2 percentage points in 2001 has come down to 16.1 percentage points in 2011. There is more improvement in female literacy than in male literacy in both rural and urban areas, according to the data.
The gender gap in literacy has come down from 24.6 in 2001 to 19.8 in 2011 in rural areas and from 13.4 in 2001 to 9.8 in 2011 in urban areas.