MARKET OUTLOOK
It was yet another bad week for the markets as the indices slipped through various technical and psychological levels. The worsening global markets further aided the downward momentum. Dow slipped below 10000 before just about managing to close above it on Friday. Selling was seen across the board with metals and Realty coming in for special attention. Heavyweights were under pressure as stocks like SBI, RIL, HDFC and HDFC Bank led the decline. Nifty has slipped almost
12% from its recent highs and is the steepest correction since Oct’09 when the markets have corrected slightly more than 12%. Is the worst behind us or there is more to come? There are no sure shot answers to this one.
There are multiple support levels both on daily as well as weekly charts between 4600 and 4700. 4650 is the level from where market finally broke out after struggling a bit around this level. Then in the last correction of October Nifty made a low of around 4540 and theoretically nifty must make a higher low this time to technically remain in a upward trend. Moreover, 200 dma for Nifty is around 4650 and is unlikely to be breached significantly, atleast in one go. 50% retracement from July lows to the recent highs also gives us a target of around 4620. So, there are a number of price points between 4600 and 4700 that might provide support atleast for the time being. We would have to wait and see whether that happens next week. As of now, no big sector is showing signs of leading on the upside. IT stocks are showing some early signs but here also only TCS remains in a relatively stronger uptrend as Infosys and Wipro are Trading below short and medium term support levels. Some oil counters like BPCL, Gail and Essar Oil are also showing positive development technically but all would depend on the kind of follow up these stocks get early next week. To summarise, we believe that market might be close to bottoming out atleast temporarily but price behavior of Nifty and key heavyweights have yet to confirm this. This confirmation might come in next couple of trading sessions. Nifty has immediate support around 4710 and 4650 while it must take out 4830-4840 to atleast come out of bearish momentum.
Markets slide on loss of risk appetite
Nifty comes down to 4700 support, looks ready to break down. A significant support zone is available around 4700. The Nifty has fallen to touch this support area. In a 'normal' correction, we should expect the Index to find support around these numbers. But, the current decline is NOT a normal correction. The decline is world wide, with a loss of confidence in risk instruments.
Support for the Nifty comes in around 4700, and, this is the point at which the Index is currently standing. Given the world wide weakness, it appears that the 4700 support may not hold. IF the 4700 support does breakdown, what are the lower levels? The answer is not easy to come by. Yet, going by long term charts a significant support area exists between 3800 and 4300. For all we know, the Nifty could slowly slide down in February itself, to touch the boundaries of the 4300 support zone.
Suggestions for Investors:
Hold on to your investment positions. Much earlier, when the Nifty was in the 5200+ area, we had suggested that all trading positions would be liquidated if the Nifty fell below 5150. We assume that readers do NOT have any trading positions now. The time for buying has not come yet. The markets must stop falling, then we should begin to see some kind of base building, then the patterns for buying will emerge. Nothing of this sort has happened yet. Investors must have patience to take advantage of big moves.
Suggestions for Traders:
Most of your trading will be done on the short side. When there are signs of a relief rally, traders should cover their short positions, and, look to take fresh positions later. Buying will make money when the markets become stable. This will take its own time.