Weekly nifty for 22nd July- 26th July 2013

             Indian economy witnessed slew of reforms during the week. To curb the fall in rupee, RBI intervened and took measures to squeeze rupee liquidity by capping the liquidity adjustment facility (LAF) at Rs 75000 cr and raising marginal standing facility (MSF) rate by 200 basis points to 10.25%. RBI has also decided to conduct a special three-day repo auction under which banks would be encouraged to raise funds totaling to Rs 25,000 cr at 10.25% for on-lending to the mutual funds. The government has raised FDI cap for 13 sectors, wherein Telecom sector has been allowed 100% FDI. WPI inflation was announced at 4.86% in June from 4.7% in May. On corporate performance front, TCS, HDFC Bank and Bajaj Auto reported better performance y-o-y for Q1FY14. FIIs turns positive with net purchases at Rs 8.5 bn, while DIIs sold to the tune of Rs 2.6 bn. Globally, the US industrial production growth for the month of June stood at 0.3%, while the Asian Development Bank trims down Asia’s growth forecast to 6.3% in 2013 from earlier estimates of 6.6% on account of slowdown in China.

             Sensex opened the week at 19926, made a high of 20256, low of 19649 and closed the week at 20149. Thus it registered a weekly gain of 191 points. At the same time the Nifty opened the week at 5991, made a high of 6066, low of 5910 and closed the week at 6029. Thus the Nifty went up by 20 points on a weekly basis.  Both the indices have formed a small black body candle on the daily charts, which is not a bearish formation. It is a continuation pattern formed in an uptrend. On the weekly charts, both Sensex and Nifty have formed a white body candle which also suggests continuation of uptrend on the weekly charts. Thus both weekly as well as daily charts suggest bullishness to continue in the near term.

              The gap of Nifty at 5889-5879 along with 50DMA (5910), which has acted as a support this week, when Nifty bounced from 5910. Thus the short term trend will remain intact as long as this gap remains. Both the indices continue to trade above the 61.8% Retracement level (Sensex 19688 and Nifty 5976) of the fall from Sensex 20443 to 18467 and Nifty 6229 to 5566 which suggests that the correction is over and the prior uptrend has resumed.

             MACD and ROC both continue with their Buy signals. RSI is moving higher suggesting increase in bullish momentum. Stochastic Oscillator has given a fresh Buy. MFI (63) has remained steady after increasing the previous week, suggesting inflow of money. ADX has fallen further to 15 suggesting that the current trend has lost all of its strength. OBV continues in Buy mode besides making higher top higher bottom formation. Thus majority of the Oscillators are suggesting continuation of short term bullishness.

              The Nifty O.I. PCR has increased and is now at 1.72. This suggests that the Put writers have gained in confidence over call writers and hence the higher value of the indicator. For the next month series, highest Open interest build up is seen at 5800 Put and 6200 Call. This suggests that the market expects a trading range with support coming in at 5800 levels and resistance around 6200 levels. In the current month series, Friday saw a lot of Put writing at the strike of 5900, which suggests immediate support to come in at around 5900 level.