Bazaaredge.com Weekly Stock Market Outlook 08Aug11

The week witnessed a sharp decline along expected lines as the overseas cues turned negative. The combined exchange weekly advance decline ratio was negative as the figures stood at 6982 : 14700. The capitalisation of the same on a commensurate basis was also negative as the figures stood at Rs 18249 Crs : Rs 50821 Crs. The NSE lost  Rs 262465 Crs in market capitalisation on a w-o-w basis. In terms of sectoral performance, the decline was led by the technology space, followed by the Bank Nifty and the Midcap Index in that order. Of the entire weekly turnover initiated during the week, the entire trade was initiated on down tick days. That underscores the underlying weakness in the markets.

 

The overseas investors were net sellers to the extent of Rs 873.3 Crs and that saw the INR close at the 44.73 levels vis-a-vis the USD (previous week 44.18 levels). The US headline indices saw the steepest fall in the benchmarks this year even as the senate reached the debt deal. With the DJIA and the Nasdaq hitting calendar year lows, the upsides are likely to be calibrated The UK FTSE 100 witnessed a steeper relative fall as the bulls surrendered their positions in a state of panic. In the Asian region, the decline was led by Hong Kong, followed by Singapore, Japan and China brought up the rear. The overseas cues are outright negative and barring corrective bounces, the domestic markets are likely to remain under pressure.

 

Technically, the domestic markets have completed the head & shoulder formation by closing below the 5400 and the required 2 % confirmatory additional decline as well. The tone and tenor of the markets is set as downwards. The weekly range advocated for the Nifty between the 5650 / 5300 levels have been violated as the benchmark tested the levels. The coming week is likely to witness a range of 5500 on the upside as long as the Nifty stays above the bullish pivot at the 5375 mark. In case of declines, the Nifty is likely to test a level of 4850 as long as the bears keep the Nifty below the 5275 levels. Barring technical pullbacks (which invariably terminate without a warning), the outlook is cautious. Capital protection must be a traders priority.

 

The indices have closed in the upper end of the intraday range as the bulls were able to offer feeble support at lower levels during the session, aided by bear covering. The intraday range specified for the Nifty between the 5375 / 5210 overshot as the Nifty tested the 5116 levels, thereby exceeding our intraday levels on the downside. The coming session is likely to witness resistance at the 5275 levels on advances. Support is likely at the 5130 levels below which the 5050 maybe seen. The wide range is due to the high base effect of Fridays range. The bullish pivot for the session is likely at the 5200 levels above which the Nifty must stay throughout the session. The bearish pivot is at the 5150 levels below which declines may occur. Traders must watch these levels for signs of trend determination in the coming session.

 

The daily candle chart of the Nifty shows a big gap down doji candle, which indicates resistance by the bulls to further declines below the 5100 area. Follow up buying above the 5200 levels (bullish pivot for the day) with higher volumes and open interest as a strict pre-requisite will see a possible buildup of some gains, though sustain ability in the near term is suspect as overhead supply can spike gains. It will take little selling to derail any attempted upthrust and therefore bulls are advised to desist from leveraged aggressive buying. The downward sloping trendline is now an unimpeachable resistance for the bulls to overcome.  The Nifty (spot) must stay above the 5200 levels sustainably with volumes and open interest expansion to rally intraday on Monday. On the flip side, sustaining below the 5150 levels may trigger a fresh bout of declines.

 

 

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Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. And not soliciting any action based upon it. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report

 

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