Equity markets had a tranquil week even as rest of the country was caught up in festive swirl. The Sensex and Nifty meandered sideways and ended the week on a flat note. Derivative expiry on Thursday failed to shake the market from its stupor, probably because traders had already squared their critical positions before the holiday season.
Quarterly earning announcements caused sporadic bursts of activity in stocks. Sun TV Network’s acquisition of the Hyderabad franchise of IPL and CESC’s curious purchase of 49.5 per cent stake in Firstsource were the other sidelights.
Europe continued to trouble global investors as Standard & Poor cut its ratings on BNP Paribas and two other French Banks and unemployment rate in Spain rose to 25 per cent in September quarter. US presidential election scheduled in early November also kept investors edgy.
Both the Sensex and the Nifty have not covered any ground last week resulting in near-Doji formation in the weekly candlestick charts.
The indices are stuck in a very narrow trading range over the last two weeks. This has left the short as well as the medium-term trends unchanged; the short-term trend is down while the medium-term trend is up. This sideways movement has resulted in loss of momentum in the short-term time frame. Oscillators in the daily chart are dipping lower, albeit in the neutral zone. Oscillators in the weekly chart are also losing steam but they continue to move in the bullish zone.
The star formation in the monthly candlestick chart needs to be tracked closely. It can signal either a pause or the end of the move from June low. The candlestick formed in November should give us further direction about the medium-term trajectory in the index. The RBI’s monetary policy meeting scheduled on Tuesday will be the next event to dictate market trend.
Next batch of quarterly results will be the other drivers for equity prices next week.
The Sensex (18,625.3) was stuck in an extremely narrow band between 18,558 and 18,810 last week. We retain a negative short-term view of the Sensex. Since the index is currently drooping lower, it can move lower to 18,442 or 18,218 once the down-trend accelerates.
But the short-term view will turn positive if the index goes on to close above 18,900. That will imply that the down-move from 19,137 peak was a minor correction and the medium-term uptrend from June low can extend further.
Medium-term trend in the index continues to be up. But as we have been reiterating there is a confluence of targets in the zone between 18,800 and 19,150.
Since the Sensex is reversing lower from this zone, it is possible that it declines towards 18,120 or 17,842 in the coming weeks. The medium-term view will be seriously jeopardised only on close below 17,842.
We retain the medium-term target on break above 19,134 at 19,504.
The Nifty (5,664.3) remained in a narrow band between 5,640 and 5,720 last week. Since the range is similar to the previous week, we retain the same view and targets as given in our last column. Traders can go short in rallies with stop at 5,750. Downward targets remain 5,663 or 5,596.
Investors can stay sanguine as long as the index trades above 5,596. Subsequent lower targets are 5,520 and 5,450. If the index reverses higher next week, then upper targets would be 5,815 and 5,825. Medium-term view for the Nifty stays positive and we will wait for a close below 5,420 to reverse this view. Target on strong close above 5,825 is 5,940.
Global cues
As the earnings season rolled on, US investors appeared nervous about the ability of companies to deliver high growth to match the valuation built in stock prices.
Other global markets also closed slightly in the negative. CBOE Volatility Index recorded three-month high of 19.6 as the Dow sold off sharply. The Dow declined further last week to move close to its short-term support zone between 13,000 and 13,050. We stay with the view that short-term trend will stay positive as long as the index trades above 13,000. Decline below this level can however drag the index to 12,670 or even lower.
Asian benchmarks such as Jakarta Composite Index and KLSE Composite continued to etch new record highs. The dollar index is stuck in a narrow band between 78.5 and 80 over the last six weeks. Decline below 77 will be good for riskier assets including emerging markets such as ours.