The Bears hold the upper hand, unless and until the 18,265 to18,372 points range is crossed. As the intermediate term trend is down, the strategy should be to use rallies close to this area for exiting long positions
BSE Sensex close: 17,870
SHORT term: Down; MEDIUM term: Down; LONG term: Up
The BSE Sensex fell 2.18% this week on slightly higher volumes. The sectoral indices which led the decline were BSE IT (-4.51%), Oil & Gas (-4.80%) and Teck (-3.14%) while the only sectoral index which gained was BSE Power (+0.26%).
One can see from the weekly chart (above) that the Sensex is in an intermediate term decline, as it has made a lower top and lower bottom formation. This is also confirmed by the MACD histogram (in green colour marked by the arrow) which fell below the median line in the week ended 13th May 2011, when the Sensex was at 18,531. As long as this oscillator remains below the median level, the intermediate term trend remains down. (MACD is short for moving average convergence divergence.)
At this moment the Sensex has marginally closed below the trendline support (in black) drawn by connecting the lows of 15,960-17,295 points. The immediate support from the 100wema is pegged at 17,625 points and the trendline support (in pink) is at around 17,207 points. The previous significant low of 17,295 points also falls within these two points and should be watched very closely, as a breach would lead to increased pressure on the Bulls.
If one looks at the bullish options (which look distant at this moment) the Sensex has to first survive above the support line this week and bounce. The 20wema pegged at 18,621 points is the first major hurdle that it has to cross and the trendline resistance (in purple) pegged at 19,420 points is the next hurdle to watch out for.
The only hope for the Bulls at the moment is the market maintaining symmetry as seen in the period August 2009 to June 2010. In this scenario we would see a sideways move in the weeks ahead.
Here are some key levels to watch out for this week.
The Bears hold the upper hand unless and until the 18,265-18,372 points range is crossed. As the intermediate term trend is down, the strategy should be to use the rallies (due to some short-term oscillators having just ventured into oversold territory) close to this area for exiting long positions.
(Vidur Pendharkar works as a consultant technical analyst and chief strategist, www.trend4casting.com.)
The gains may get capped at around 5,450-5,500 on the Nifty
The 25-basis-point hike in key policy rates by the Reserve Bank of India (RBI), higher headline inflation for May and worries about a slowdown in the global economy along with the contagion effect of the Greek debt crisis, pulled down the Indian market by 2% this week.
The market, which was largely volatile, closed flat on Monday as the broader indices helped to limit the losses. The indices snapped their four-day losing streak, ending with modest gains on Tuesday, despite a sharp spike in headline inflation for May. Nervousness ahead of the RBI's policy review led to a steep fall on Wednesday.
On Thursday, the rate hike announced by the central bank together with signals of an economic slowdown, dragged the market further down on the last two trading days of the week. Overall, the Sensex tumbled 398 points, to end the week at 17,871, and the Nifty slipped 119 points to 5,366. There is a likelihood of a small gain on Monday. However, it may get capped at around 5,450, or at best around 5,500 on the Nifty.
In the sectoral space, BSE Power and BSE Fast Moving Consumer Goods ended unchanged, whereas BSE Oil & Gas and BSE IT declined 5% each.
Among Sensex stocks, Reliance Infrastructure surged 7%, Hindustan Unilever, Reliance Communications gained 3% each, Bharti Airtel rose 2% and NTPC added 1%. On the other hand, Reliance Industries, Hindalco Industries declined 8% each, TCS, Wipro fell 7% each and Maruti Suzuki settled 5% lower at the end of the week.
The RBI raised interest rates on Thursday for the 10th time since March 2010. The central bank hiked the repo (short-term lending) and reverse repo (short-term borrowing) rates by 25 basis points each, and these now stand at 7.5% and 6.5%, respectively. The central bank stated that it would continue to deal with stubbornly high inflation while balancing the adverse movements with global developments and their likely impact on domestic growth.
Headline inflation went up to 9.06% in May on rising prices of manufactured products and petrol. Inflation, as measured by the Wholesale Price Index (WPI), stood at 8.66% in April. It was 10.48% in May 2010. Inflation has been above 8% since January 2010. It has stayed above 9% since December last year and moderated to 8.66% in April this year, before the latest rise.
Food inflation for the week ended 4th June eased marginally to 8.96%, from 9.01% in the previous week. The latest fall, although very marginal, is seen as a silver lining by the government, which has been battling the high price rise across all segments for the past few months and has had to also contend with low economic growth and factory output numbers in recent months.
In the corporate world, the 13-day strike at the Manesar plant of Maruti Suzuki India (MSI) was called off late Thursday night following a deal brokered by Haryana chief minister Bhupinder Singh Hooda. MSI has agreed to reinstate the 11 workers who were sacked and it will take a lenient approach on the no-work-no-pay rule for the strike period. On the other hand, the workers have conceded the management's demand not to have a second union in the company.
Tata Steel said on Thursday that it has sold its 26.27% stake in Australian coal miner Riversdale to global mining major Rio Tinto for A$1.06 billion ($1.11 billion). "Tata Steel has decided that it would not want to hold its equity investment in Riversdale Mining, which is proposed to be delisted, without any joint venture agreement with the majority shareholder in unlisted Riversdale," the company stated.
Reliance Industries (RIL) was under pressure during the week, after a report by the Comptroller and Auditor General (CAG) said the oil ministry and its technical arm, the Directorate General of Hydrocarbons (DGH), allegedly favoured RIL by allowing it to double the development cost of its landmark KG-D6 gas field. The company denied any wrongdoing.
On the international front, China's inflation accelerated in May to a 34-month high of 5.5% and up from 5.3% in April. Also, the country's central bank announced a 50-basis-point increase in reserve requirements for banks, putting pressure on lenders.
This apart, the Bank of Japan kept its interest rates steady at 0%-0.1% and added 500 billion yen ($6 billion) to its 3-trillion-yen loan scheme, aimed at boosting lending to industries with growth potential.
German chancellor Angela Merkel on Friday dropped her government's insistence on forcing a rescheduling of Greek government bonds, ending a six-week impasse that threatened to halt any more loan payouts to Greece. The move came as the Greek prime minister reorganised his government, naming a new finance minister and pushed an austerity package into law. EU finance ministers are to meet on Sunday to discuss a new aid package for the crisis-ridden Mediterranean country.
Coal India has been doing well since the company was listed last November and has become the second most valued firm after Reliance Industries. On the other hand, RCom and Reliance Infra have not been performing well on the stock market
Mumbai: Two Anil Ambani group firms, Reliance Communications (RCom and Reliance Infrastructure (Reliance Infra), will move out of Bombay Stock Exchange’s blue chip index Sensex in August, reports PTI.
While RCom would be replaced by Sun Pharmaceuticals, Reliance Infra would be substituted by Coal India on the 30-share index.
The changes would be effective from 8th August, Bombay Stock Exchange (BSE) said in a statement yesterday.
Coal India shares have been doing well since the company was listed in November last year and has become the second most valued firm after Reliance Industries.
Last week, Coal India’s market valuation surged to Rs2,55,338.85 crore.
On the other hand, shares of RCom and Reliance Infra have not been performing well on the stock market.
Apart from the Sensex, there would be changes in BSE-100, BSE-200, BSE-500 and sectoral indices, among others.
Eight companies including IndusInd Bank, Titan Industries, Canara Bank, Adani Power and Federal Bank will make their entry into BSE-100 from 8th August.
Entities that would move out of this index include Indian Hotels Company, Torrent Power, MMTC, Financial Technologies and IVRCL.
The decision to revise constituents of various BSE indices was taken by the Index Committee of the Exchange, during the meeting held on Friday.