The Reserve Bank of India increased the repo and the reverse repo rates by 25 basis points to 7.5 per cent and 6.5 per cent respectively in its monetary policy meeting last Thursday. It is now amply clear that the Central Bank's monetary policy stance remains firmly anti-inflationary, even if it comes at the cost of short-term deceleration in growth. Discouraging show by the Index of Industrial Production, which was abruptly lower at 6.34 per cent in April 2011 against 13.1 per cent in last April and high food inflation at 8.96 per cent, kept the mood in the market sombre. Selling pressure over the past three trading sessions dragged the Sensex down by 398 points or 2 per cent for the week.
Though the daily volume traded was low in the beginning of the week, it increased in the later part of the week when the bellwether was slipping lower. That Reliance Industries, which enjoys the highest weight of 10.9 per cent in the index, tumbled 8 per cent during the week too led to the index decline. The F&O total turnover was at Rs 1, 00,173 crore. A put call ratio below 1 however hints that the overall mood is turning positive with the bears covering their short positions. Though the Sensex managed to close above its 21-day moving average on Tuesday, which was the only positive day for the week, it subsequently breached this average conclusively. It is now trading well below its 21- and 50-day moving averages.
The 14-day relative strength index too has entered the bearish zone from the neutral region. The weekly RSI however is hovering around 40 levels and is on the brink of entering in to the bearish zone. Daily moving average convergence divergence indicator has crossed over and is signalling a sell. Both daily and weekly MACD are hovering in the negative territory. Both the 10-day rate of change oscillator as well as its weekly oscillator is featuring in the negative terrain. These signal that the medium-term trend is in danger. The index's decline in the previous week has not changed our medium-term view. The Sensex is in a medium-term downtrend and only an emphatic rally beyond 19,037 will mar this trend. As long as the index trades below 18,700, it has the prospect of slipping to 17,420 or 16,647 levels in the ensuing weeks.
In the short-term, the Sensex is consolidating sideways in the range between 17,800 and 18,600. Last week, it fell below its key support level of 18,124 and is currently trading just above its next important support level of 17,786.
A rebound from this support level will restore the short-term trading range between 17,800 and 18,600. Support below 17,786 is approximately at 17,600 levels. Any decisive violation of 17,786 will activate the medium-term targets and pull the index down. However, an upward bounce from its immediate support level can lift the index higher, such that a pull back to 18,200 becomes possible. On breaching this, 18,500 in the short-term too becomes a possibility. But will the bulls fight back for a pull-back rally? We have to wait and watch!
Nifty (5,366.4)
The Nifty slumped 119 points last week, breaching it 21-day moving average. The index penetrated its immediate support at 5,434 and is halting just above its March 25 low of 5,328 levels. The Nifty could bounce up from 5,328. In that scenario, it can move sideways in the band between 5,328 and 5,600 in the short-term.
Upward reversal will encounter resistance around 5,450 and then at 5,550 levels. Next key resistance is at 5,628 levels. However, strong breakthrough of 5,328 will accelerate the down move and pull the index lower to 5,224 and then to 4,989 levels in the upcoming months. Nifty is in a medium-term downtrend. A move above 5,708 is necessary to mitigate this downtrend.
Global Notes
The dollar index continued its up move and met with key medium-term resistance at 76.5 on June 16. However, it subsequently reversed lower on Friday to close at 75.46 levels.
The Dow snapped its six-week losing streak by gaining 52 points for the week. It was very volatile during last week and managed to close at 12,004, around its psychological level of 12000. Immediate support for Dow is at 11,850 levels and resistance is at 12,200.
In commodities, gold climbed marginally higher by $9 an ounce last week to finish at $1,539. It marked its life-time high of $1,575 on May 2. Light crude plummeted $6.3 or 6 per cent to close at $93 a barrel. Light crude is likely to test its immediate support at $92; strong weekly close below this support can pave way for a decline to $85 in the medium term. However, an upward bounce will encounter resistances at $97, $100 and $103 levels.
source-businessline
steven
management trainee-fundamental analysis
DENIP consultants Pvt Ltd
No comments:
Post a Comment