Weekly Nifty For 29th July- 2nd August 2013

            During the week, the Reserve Bank of India (RBI) announced additional liquidity tightening measures to restrict the rupee fall. RBI asked banks to maintain higher average CRR of 99% of the required as against 70% earlier. However, the market sentiments were hurt, raising concern on growth parameter with stricter norms coming up from RBI. Mixed bag of corporate results and fund outflow from FIIs have reversed the market movement southward with BSE Sensex losing over 400 points w-o-w to settle at 19748 levels and NSE Nifty at 5886, down 143 points. FIIs sold to the tune of Rs 2.9 bn and DIIs to the tune of Rs 3.7 bn. Meanwhile, PMO appointed committee has taken steps to speed up infra projects across railway, highway, airport, port and power section. Global rating agency, Moody’s expects that recovery in Indian economy is unlikely in 2nd half. Globally, UK economy has shown the signs of recovery with GDP for Q2FY13 rising to 0.6% from Q1FY13. Europe manufacturing expands for the first time in 2 years to 50.1 in July from 48.8 in June, while sales of the new US homes rose in June to the highest level in five years.

             Sensex opened the week at 20096, made a high of 20351, low of 19699 and closed the week at 19748. Thus it registered a weekly loss of 401 points. At the same time the Nifty opened the week at 6009, made a high of 6093, low of 5869 and closed the week at 5886. Thus the Nifty went down by 143 points on a weekly basis. On the daily charts, both the indices have formed Three Black Crows formation which is a bearish reversal pattern. A big black body candle with a long upper shadow has been formed on the weekly charts. Long upper shadow indicates selling pressure at higher levels. Thus both daily as well as weekly charts suggest bearishness in the near term.

             Both the indices fell after making a lower top at Sensex 20351 and Nifty 6093 and have closed the week in the first Upward Gap between Sensex 19785-19723 and Nifty 5889-5879. As per Gap theory, Short term trend will turn bearish if the market stays below this Upward Gap. There is one more critical gap that both the indices formed three weeks back and i.e. a Bullish Rising gap between Sensex 19093-18925 and Nifty 5749-5699. This gap acted as a support twice as the Sensex and Nifty bounced from just above this gap. This gap marked the beginning of an upward rally and hence it is a Bullish Breakaway gap. Therefore as per Gap theory, the medium term trend will turn down if this gap is breached.

             This week both Nifty gave a Rising Wedge bearish breakout and the target as per this breakout falls at Nifty 5715.  Generally this occurs in an uptrend but here it has occurred in the middle of a downtrend and is acting as a bearish continuation pattern, so there is a possibility of it touching Nifty 5566, the point from where the rally started. The trend in the short & medium term timeframe has turned bearish, but the trend in the long term timeframe continues to remain bullish.

           MACD has given a fresh Sell signal but is still in positive territory. ROC continues with its Buy signal as it remains in the positive zone. RSI has given a Sell signal this week suggesting bearish momentum to increase. Stochastic Oscillator continues with its Sell signal as %K (46) remains below %D. MFI has reduced but is still above the centerline. ADX has fallen further to 13 suggesting that the current trend has lost all of its strength. The Directional Indicators have given a Sell signal on Thursday as +DI went below –DI. Even though OBV has moved lower, it still continues in Buy mode as it has yet not formed lower top lower bottom formation. Thus majority of the Oscillators have turned bearish in the short term.

           The Nifty O.I. PCR has reduced and is now at 1.13. For the current month series, highest Open interest build up is seen at 5800 Put and 6000 Call. This suggests support at 5800 levels and resistance around 6000 levels.