Nifty becomes overbought on the weeklies now

The next cyclical top falls in the end of March 2012, so it will be interesting to watch how the market behaves from here on as it is now a desperate situation for the Bears to pull things back

S&P Nifty close: 5325.35

Market Trend
Short Term Up            Medium Term Down            Long Term Down

The Nifty opened lower and fell sharply on the very first day of the week to hit the projected S1 level. The subsequent rise was however so sharp that the Bear ran for cover as the Nifty almost hit the projected R2 level (5,343) of the week and close with a crisp gain of 121 points (+2.33%). Volumes during the rise were significantly higher compared to previous week. The Sectoral Indices which outperformed were BSE Reality (+4.77%), BSE Auto (+3.54%), BSE IT (+3.33%), BSE Bankex (+3.20%) and BSE Teck (+3.05%) while the gross underperformers were BSE CDS (-2.80%), BSE CGS (-0.97%) and BSE PSU (+1.04%).  

The weekly Histogram MACD continued to move higher and is above the median line indicating strength. We have seen the Nifty rally for the 5th consecutive week (Fibonacci number) in which it has risen more than 14% and in the process has also broken above the weekly channel shown in the chart. This is a sign of a further rise in the weeks ahead but considering the overbought nature of the weekly oscillator one should keep a strict ‘Stop Loss’ on longs at the upper trendline of the channel, pegged around 5,215 points.

Here are some key levels to watch out for this week.
  • As long as the S&P Nifty stays above 5,245 points (pivot) the Bulls are in control even in the shorter time frame and the Bears have to make efforts to push prices below this.
  • Support levels in declines are pegged at 5,156 and 4,987 points.
  • Resistance levels on the upside are pegged at 5,414 and 5,504 points.

Some Observations
1.    After the sharp dip on the very first day of trade in which the Nifty fell to the S1 level of the week of 5,078 points the Nifty recovered the very next day and broke above the resistance pegged in the 5,221-5,237 points.
2.    This resulted in desperate Bear covering as Nifty rose sharply and closed above the resistance line of the channel. If the Nifty is able to sustain above this channel for 3 consecutive weeks then the intermediate downtrend will be deemed to be over and there could be significant upsides in the months ahead. However, it is premature to jump to such a conclusion at this moment.
3.    Despite the sharp rise, weekly averages continue to be negatively phased implying that this rally requires some more foundation to sustain for a longer period.

The small correction we had envisaged last week lasted for only a day but was sharp as it fell to the S1 level for the week. However, the ensuing recovery was also very sharp catching the Bears unawares and sending them scurrying for cover as importance resistance levels mentioned above very easily taken out. Immediate resistance is pegged at 5,399 points (top for the week ended 28 October 2011), 5,404 points (61.8% retracement of the decline from 5,944-4,531 points) and 5,434 points (50% retracement of the decline from 6,338-4,531 points). Another interesting thing to note is that the tops since April 2011 have been roughly 14 weeks apart and we completed 14 weeks from the last top of 5,399 (28 October 2011). Also there is a 32 week bottom to top cycle prevailing and last week was also the 32nd week from the low of 24 June 2011. The next cyclical top as per this cycle falls in the end of March 2012, so it will be interesting to watch how the market behaves from hereon as it is now a desperate situation for the Bears to pull things back. Well, they must now be hoping that the trial court ruling on the then FM’s role in the 2G spectrum provides the trigger for a correction. The odds remain in favour of profit taking and shorting (only for the brave hearted). This week’s open will be determined as to what/if the trial court judge rules today.

(Vidur Pendharkar works as a Consultant Technical Analyst and Chief Strategist at


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RBI launches industrial outlook survey for Jan-March 2012

The industrial outlook survey gives an insight into the perception of non-financial public and private limited companies engaged in manufacturing activities about their performance and future prospects

Mumbai: The Reserve Bank of India (RBI) on Friday said it has launched its industrial outlook survey for the January-March 2012 period, reports PTI.

The survey gives an insight into the perception of non-financial public and private limited companies engaged in manufacturing activities about their performance and future prospects, a press release issued here stated.

The assessment of the business sentiment in the present quarter and expectations for the ensuing quarter are based on qualitative responses to 20 major parameters.

These include overall business and financial situations, demand indicators, price and employment expectations and profit margins, among other parameters.

The survey is intended to provide useful forward-looking inputs for policymakers, analysts and businesses, it said.

The RBI has been conducting the Industrial Outlook Survey on a quarterly basis since 1998. The latest will be the 57th round of the survey.

It has entrusted the task of conducting the survey for the current quarter to the Centre for Research Planning and Action (CERPA).

The CERPA would get in touch with several manufacturing companies during this quarter for seeking their valuable feedback so that it can be included in the survey, it added.

However, those manufacturing companies that are not approached by CERPA can also participate in the survey by downloading the survey schedule from the RBI’s official website.

CERPA, which was established in 1972, conducts social science research, providing consultancy services on developmental issues to help planners and policymakers and also conducts charitable services for the disadvantaged and poor sections of the country, it said.

Meanwhile, in another statement, the RBI said it has launched the 16th round of its survey on ‘Order Books, Inventories and Capacity Utilisation Survey (OBICUS)’. The survey is for the reference period October-December 2011.

The apex bank has been regularly conducting an OBICUS for the manufacturing sector on a quarterly basis.

“The survey captures quantitative data on new orders received during the reference quarter, backlog orders at the beginning of the quarter, pending orders at the end of the quarter, total inventories with breakup of work-in-progress and finished goods inventories at the end of the quarter...” it said.

It also collects data on the item-wise production in terms of quantity and values during the quarter, as against the installed capacity, from a targeted group of manufacturing companies.

The information on installed capacity, quantity produced, value of production and so on are used for calculating capacity utilisation at the industry as well as at all-India level. The survey has been providing a significant input to the RBI in monetary policy formulation.

Mumbai-based firm Centre for Monitoring Indian Economy (CMIE) has been mandated to conduct the OBICUS survey.



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