Sep 25: All which goes up comes down

Indian Currency witnessed one of its sharpest and fastest depreciation in the recent times.

Rupee is trading near 50. Commodities are on the way finding support. All the commodities corrected in the range of 8-2% on the last day of the trading session. Silver tanked nearly 8% while Gold corrected 2%. This carnage is all because the appreciation in the Dollar. Dollar has been rising since quite a long against almost all the global currencies.

Indian equities market corrected more then 4% in a week. Last weeks rally was a false rally. Almost all the large cap stocks lost nearly 5 of their market capitalization. Nifty and Sensex lost 4.3% & 4.6% respectively. Small cap and Midcap Index shrinked by 2.5% in a week. Capital goods Index lost the most, closed below by 7.5%. Metal Index and the Oil & Gas Index too were hit severely, which tanked down nearly 6% each. Bankex and IT index closed down 3.7 & 2.5% each.

Amongst the Large cap stocks Lnt, Tata motor, Ster Ind lost more than 9%. Sesagoa, Rel Infra & Ril Ind lost in the range of 6% -7%. Tata Steel, Dlf closed down 5%. While JP Ass lost just 3%. In the Mid cap and Small Cap stocks like Pantaloon lost 12.5%, Jain Irrigation 11%, Godrej Ind 9%, Orchid Chem 8%, Crompton Greaves & Alok Ind lost 7%.

Gainers list are very less as compared to the losers. Reliance Power & Grasim gained 2%, ACC 3%. In the midcap and the small cap stocks Alfa Laval gained 12%, Marathon 77% in a single week, Zandu reality 22%, Sunteck reality 13%, KGN Ind 13% and Inox gained 15%.

In the last article I had mentioned that , if the Nifty falls below then it may correct to 4910 levels and that will be a Lower Top and Lower Bottom formation. We can clearly see that the Nifty made a Double Top at 5160 levels and corrected. Nifty closed down at 4868 down by 4% in a week. On Thursday Nifty closed down below its two parallel after taking support at its 38.2% retracement levels. Nifty on the last day of the trading week made a Doji pattern at the bottom but that don’t suggest that the correction is over. Since the last few weeks I have been informing the readers of the Informed News paper that the Markets are still looking bad and we could continue with the correction. On Thursday Nifty closed below its 20DMA. Nifty will find support at 4800 levels.

If the Nifty closes below 4800 levels, then we may see more carnage.

Calls for the week

Sell Bhel below 1680 SL 1695. Made a low of 1573

Sell Container Corp SL 895. Made a low of 873.

Buy Corporation bank above 456. Could not trigger the buy price.

Sell Hero corp below 2193. SL 2205. Made a low of 2021.

Buy Hdil above 111.50 SL 110. Made a high of 114.80

Buy Maruti above 1117 SL 1106. Made a high of 1162.

Sep 18th:

The Industrial production for the month of July was way below expectations at 3.3% growth y-o-y compared to a growth of 8.8% in the month of June. The July industrial data indicates that the tight monetary policy by the RBI has started impacting growth. This is the weakest growth recorded in the last 24 months. The Industrial Output for the period of April-July 2011 expanded by 5.8%. The Output was recorded at 7.8% for the fiscal year ending March'11 compared to 10.5% in the year 2009-10.

The Inflation figures for the month of August will be released on the 14th of September. Inflation has been around the double digits for the Indian Economy and which still indicates that RBI may hike the rates by 25 bps in the upcoming policy review.

The Rupee continued to slip down against the dollar, touching its 2 month low of 47.93 on Wednesday. Its good news for the IT and the Export companies but this could deepen the import of the Oil from the other countries. Depreciating Rupee can be biggest concerns for the real economy in the country’s rising oil import bill.

The crisis in the Euro zone has again flared up. This could definitely affect the rest of the world. Greece is close to default. Yield on 10-year Greece note rises to 24% as the country searches for funds to pay of its own Debts.

RBI raised the benchmark interest rates by Quarter of a percent point on Friday and kept Cash Reserve Ratio rate unchanged. The Repo Rate now stands at 8.25% while the reserve ratio gets adjusted to 7.25%. The CRR remains unchanged at 6%. The hike was in the line of the expectation. The rate has been hiked due to the growing demand for the food to the commodity sector. Inflation seems to be the talk of the town, so rate hike was expected. But looking at the IIP and GDP data more rate hike in the near future is not expected. We may be at the peak of the rate hike journey.

After sharp fall in the last week from 5163, we had a gap down opening in Nifty. Nifty made a low of 4911 on Monday. Since Tuesday again nifty inched back to make a high of 5143 on the last day of the week. Markets have been very volatile on back of RBI meet. Traders were very active on the banking stocks. Nifty have taken good support at its 23.6% retracement levels. If we take the Fibonacci levels from 5700 to 4720 levels. On the last day of the trading week nifty closed above its 38.2% levels. Nifty may again inch higher and try to close above the 5170 mark, if that is done then we might see nifty making new recent high and move within the two parallel lines. This could be higher bottom and higher top formation.

But if the Nifty corrects and fails to close above 5170 levels then we might see some more correction and Nifty may slip below 4910 levels. And then it could the lower bottom and lower top formation.

Calls for the week

Sell Asian Paint below 3130 SL 3145.

Sell Bhel below 1680 SL 1695.

Sell Container Corp SL 895.

Buy Corporation bank above 456.

Sell Hero corp below 2193. SL 2205.

Buy Hdil above 111.50 SL 110.

Buy Maruti above 1117 SL 1106.

Sep 3rd: 6% in just 3 days

This has been one of the shortest trading weeks in a year and that too with a gain of more than 6% in the Indices. Is this just a technical bounce back or end for the falling markets? Market men finding it really were hard to trade in the market are confused with, which way to trade in. Last week we saw markets collapsed more than 11% in a single week. But this recovered 3%.

Nifty after taking a good support at 4800 levels bounced back sharply to close above 5000 levels. Sensex closed few hundred points below 17000 levels. But the recovery again is too fast and can be short sighted. As discussed in the past also that there has been no major changes in the fundamentals of India, so these kind of fast recovery can be short lived only. This can be just proved as a bounce back from the carnage which happened last week. As the Nifty was trading below its over sold zone and the MACD buy signal on the second trading session helped the traders to take positive trades.

Finally DLF took a break from its long down trend and gained nearly 20% in a single week. Rcom after its likely clean cheat gained 18%. Jsw steel too recovered 19%. Rel Capital 18%. Tata steel 16%. Some of the other stocks which gained were Parasvanth and Chambal Fert 18 & 16 % respectively. T. motor 3%, Mnm, Cairn, Sun Pharma 10% each. Amongst the small and mid cap stocks were Accentia Tech 31%, Panaromic universal & Confidence Petro 27%.

Stocks which lost in the week are Ongc 5%, Ntpc 2%, Maruti 3%, Pnb 6%. In the Midcap and Small Cap Sks Micro finance lost 14%, Kgn Ind 12% and Simple Infra 10%. Pranetta closed down 42% while Bodal Chemical corrected 38%.

Technically speaking, If we looking at the Nifty chart 1, we can clearly see that the Nifty had taken support at its 161.8% retracement levels from the low of 5177 and high of 5944 after its long downtrend. Its 161.8% retracement levels come to 4703. Nifty since a long time was trading in its oversold zone. But this week the MACD have also given positive trigger and the markets did bounce back. But am still not comfortable with the markets.