Market may move further down: Weekly Market Report

The downtrend may gain in strength if Nifty closes below 5,645

The market settled marginally lower on concerns about the US economy, as the world’s largest economy gets ready to implement $600 billion in spending cuts and hike in taxes early next year. Fears of another recession saw markets across the world settling lower, and India was no exception. Indian investors will focus on economic indicators like industrial output and headline inflation numbers in the holiday-shortened next week.
The Sensex closed the week at 18,684, down 72 points (0.38%) and the Nifty finished 11 points (0.20%) down at 5,686. The index may see the downtrend gaining strength if it closes below 5,645.
On Monday the market was directionless for almost the entire session but managed to close with a positive bias. A smart recovery in the last hour saw the market close an otherwise unexciting session, with modest gains on Tuesday. The re-election of Barack Obama as the US president led the benchmarks higher on Wednesday. 
Re-emergence of global economic worries saw the market closing lower on Thursday. Pressure in PSU banking stocks following lower-than-expected net profit from State Bank of India led the market down on Friday.
BSE Realty (up 5%) and BSE Fast Moving Consumer Goods (up 2%) were the top sectoral gainers while BSE Capital Goods and BSE Oil & Gas (down 2%) each were the main losers.
Cipla, Tata Motors (up 4% each), HDFC (up 3%), ITC and Wipro (up 2% each) were the key gainers on the Sensex. On the other hand, Tata Power (down 5%), Hindalco Industries (down 4%), ONGC, Larsen & Toubro and Tata Steel (down 3% each) settled at the bottom of the index.
The Nifty toppers were Asian Paints (up 5%), Cipla, Tata Motors, HDFC (up 4% each) and ACC (up 3%). The laggards were led by IDFC (down 6%), Tata Power (down 5%), Hindalco Industries (down 4%), L&T and ONGC (down 3% each).
The HSBC India Manufacturing Purchasing Managers’ Index (PMI)—a measure of factory production—stood at 52.9 in October slightly up from September, when it was 52.8. The October reading points to a further improvement in the health of the manufacturing sector, which witnessed the weakest growth rate in nine months in August.
The HSBC Services PMI for October declined significantly to 53.8 in October from 55.8 in the previous month. The October reading was the slowest since April and was attributed to a decline in new orders and hiring levels.
Among corporates, State Bank of India on Friday posted a 30.16% jump in its net profit to Rs3,658.14 crore during the second quarter ended September 2012. However, the bank showed signs of stress on asset quality as the gross non-performing assets (NPAs) ratio jumped to 5.2% (Rs49,202.46 crore) from the year-ago period of 4.2%.
Arvind Kejriwal, former officer of the Indian Revenue Services (IRS) turned activist-politician on Friday alleged that despite receiving a list of 700 people who have bank accounts in HSBC in Geneva, the Indian government is reluctant to take action against big names like the Ambanis, Tandons, Goyal, Burmans of Dabur and Yash Birla.
Now that Barack Obama has been re-elected at the president of the US, the focus shifts to the “fiscal cliff” as the US government is set to implement a $607 billion spending cut and tax increases on 1 January 2013.
The situation in Europe seems to have no end as a deputy finance minister of Greece was reported saying that the country was fast running out of cash while it awaits the next tranche of its 130-billion euro ($165.16 billion) international bailout. This apart, the Bank of France, on Friday said the country is expected to see a 0.1% decline in GDP in the fourth quarter of 2012, highlighting fears of the nation slipping into recession.


Weekly Nifty View: Bulls have to act fast or else time will start running out

If the S&P Nifty stays below 5,714, the bulls will be under pressure


S&P Nifty close: 5,686.25

Market Trend
Short Term: Up              Medium Term: Up               Long Term: Down
After a flat open the Nifty rallied in the first half of the week to hit a high of 5,777 points (on 7 November 2012) after which profit taking coupled with speculative selling saw the market give up its entire gains and close the week in the red. We had warned that 6 November 2012 (21st day from the top of 5,815—a Fibo number) could be the date after which profit taking would take place and the very next day the market obliged. However, we did better than the US markets which tanked after the presidential elections. Volumes were marginally higher as compared to the previous week as the Nifty closed 11 points (-0.20%) in the red. The histogram MACD, which is above the median level, moved still lower indicating that even though the bulls are in control they have to push prices higher and simply cannot let them remain choppy for too long.
The sectoral indices which outperformed were CNX Realty (+5.00%), CNX FMCG (+1.67%), CNX PSU Bank (+0.91%) and CNX Consumption (+0.58%) while the underperformers were CNX Energy (-2.14%), CNX Metal (-2.00%), CNX Commodities (-1.28%), CNX Infra (-1.32%) and CNX PSE (-1.08%).
Some key levels to watch out for this week 
 If the S&P Nifty stays below 5,714 points (pivot) the bulls will be under pressure.
 Support levels in the declines are pegged at 5,650 and 5,614 points. 
 Resistance levels on the upside are pegged at 5,750 and 5,813 points.
Some Observations
1. The Nifty has completed the 61.8% retracement level of the decline from 6,338-4,770 points pegged at 5,740.
2. The 78.6% retracement level of the fall from 6,338-4,770 points is pegged at 5,951 points, which also coincides with the top of the channel (in brown).
3. The Nifty is now moving within a sharp up sloping channel (in blue), support from which is pegged around 5,627 points and resistance is pegged around 6,005 points, this week.
4. We have remained above the previous weekly top of 5,629 points (24 February 2012) which is a sign of strength as long as the index stays above it.
5. The weekly chart above also shows a channel (in brown) which intersects the channel (in blue) the resistance lines of which are pegged around 5,996 points. This should be closely watched in the week ahead.
6. The volumes were higher as compared to the previous week which is sign of struggle for control around the 5,750 points level.
7. One has to closely watch the “gap area” between 5,649-5,682 points. If this gets completely closed the trouble for the bulls will increase.
The bulls failed to capitalize on the advantage they had and let go off all the gains, in fact closing in the red. We can see a long upper shadow in the candlestick of last week which implies that there is stiff resistance coming in at the 5,750-5,815 point area. Unless and until this is taken out the bulls cannot make further headway. One should keep a strict stop loss on longs below 5,629 points on a weekly close. The two-year cycle from the top of November 2010 which also falls in the fourth-fifth week of this month also indicates that a significant top could take place this month. From the above one can conclude that time is running out for the bulls who have to move fast to drive prices higher, otherwise they could be in for serious trouble especially if the Nifty breaks and closes below the channel in blue.
(Vidur Pendharkar works as a consultant technical analyst & chief strategist at


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