Archives : BUDGET FAILS TO CHEER THE MARKET - 01/03/2013.

BUDGET FAILS TO CHEER THE MARKET – 01/03/2013.

NO NEWS IS PERHAPS GOOD NEWS.

Honorable FM Shri P.Chidabaram presented the Union Budget in the backdrop of economy slowing down, higher inflation and a challenge of fiscal consolidation. Budget did not have any major announcement which could spur the market upwards. Despite it being the pre-election budget, it was surprisingly not overly populist, which is a positive by itself. But not having taken any tough measure will be a case of missed opportunity. FM made an attempt to deliver on his commitment to contain the fiscal deficit to 4.8% but that will be dependent on the growth in the economy. Budget has been positive for key sectors like agriculture, infrastructure and financials. Interestingly STT on derivatives has been reduced while CTT has been introduced. Market reacted negatively on the day of Budget because of some uncertainty regarding Tax Residency Certificate to be provided by the FIIs. Eventually it was clarified the next day but the damage to the sentiment was already done.

 


BUDGET FAILS TO CHEER THE MARKET – 01/03/2013.

NO NEWS IS PERHAPS GOOD NEWS.

Honorable FM Shri P.Chidabaram presented the Union Budget in the backdrop of economy slowing down, higher inflation and a challenge of fiscal consolidation. Budget did not have any major announcement which could spur the market upwards. Despite it being the pre-election budget, it was surprisingly not overly populist, which is a positive by itself. But not having taken any tough measure will be a case of missed opportunity. FM made an attempt to deliver on his commitment to contain the fiscal deficit to 4.8% but that will be dependent on the growth in the economy. Budget has been positive for key sectors like agriculture, infrastructure and financials. Interestingly STT on derivatives has been reduced while CTT has been introduced. Market reacted negatively on the day of Budget because of some uncertainty regarding Tax Residency Certificate to be provided by the FIIs. Eventually it was clarified the next day but the damage to the sentiment was already done.

TECHNICALLY SPEAKING. 

Sensex opened the week at 19365, made a high of 19411, low of 18793 and closed the week at 18918. Thus it registered a weekly loss of 399 points. At the same time the Nifty opened the week at 5870, made a high of 5878, low of 5671 and closed the week at 5719. Thus the Nifty went down by 131 points on a weekly basis.

Both Sensex and Nifty have formed a small white body candle on the daily charts which is completely inside the previous days black body candle. It is a Bullish Harami pattern which is a Bullish Reversal pattern but it requires a confirmation in the form of a white body candle on Monday. The confirmation becomes critical not only because of the size of the small white body candle but also due to the big black body candle formed on the previous day. The weekly chart has a big black body candle in line with the down trend. Thus whether a short term pull-back happens or not depends on Monday’s candlestick formation. But the trend in the higher timeframe i.e. weekly remains bearish.

Both the indices continue to remain below the short term average of 20dma (Sensex – 19420 and Nifty – 5879) and the medium term average of 50dma (Sensex – 19628 and Nifty – 5948) and hence both short and medium term trends continue to be bearish. However, the indices continue to remain above the long term average of 200dma (Sensex – 18296 and Nifty – 5550). Thus the trend in the short term and medium term timeframe continues to be down, while that in the long term timeframes continues to remain bullish.

Currently the market is undergoing a strong correction of the previous rise. If we consider the rally from Sensex 15748 to 20203 and Nifty 4770 to 6111, then the minimum retracement levels for the Sensex will be 18501-17976-17450 and 5599-5441-5282 for the Nifty.

Both Sensex and Nifty had completed a Bearish Head and Shoulders pattern last week and the target according to that is at Sensex 18519 and Nifty 5519.

Both the indices had bounced back from Sensex 18255 and Nifty 5548 which is within the Bullish Rising Gap between Sensex 18062-18284 and Nifty 5447-5526. This gap has acted as a strong support for the market even before as the Sensex had bounced back from a low 18291 and Nifty 5534. This gap holds more significance because a breach of this gap will signal the end of the current rally.

The above mentioned Gap, Intermediate Bottom (Sensex 18255 and Nifty 5548) and the 200dma (Sensex 18296 and Nifty 5550) form a confluence zone between Sensex 18255-18296 and Nifty 5526-5550. This will act as a strong support zone.

On the weekly charts, both the indices had previously completed a Flag formation and the target according to the pattern comes in at Sensex 21024 and Nifty 6415. The targets will be achieved as long as the Sensex remains above 18255 and Nifty 5548. If we take the Saucer formation which is due to the fall from Sensex 18523 to 15748 and Nifty 5629 to 4770, then the target comes in at Sensex 21298 and Nifty 6488. Hence we have a Target zone of 21024 - 21298 on the Sensex and 6415 - 6488 on the Nifty.

MACD and ROC both are negative and continue in Sell mode. The RSI at 31 continues to fall and is indicating bearish momentum. Stochastic Oscillator is in oversold zone at 13 and also %K is above %D. MFI has moved higher but is still below the centerline at 41, hence it continues in Sell mode. ADX has moved higher to a level of 29, suggesting that the down trend is now gaining strength. The Directional Indicators are in Sell mode as +DI continues to remain below -DI. OBV continues in its Sell mode. Bollinger Band continues with its Sell signal. Majority of oscillators are in Sell mode and hence one can expect bearishness to continue in the short term.

The Nifty O.I. PCR has reduced to 0.99. Highest Open interest build up is at 6000 Call and 5700 Put. This suggests that the market expects a trading range for the Nifty with support at 5700 and resistance around 6000 levels. On Friday there was very high Put writing seen at 5600 strike and Call writing at 5900 strike. This suggests that range for the Nifty is shifting lower to 5600 to 5900. Those who had applied long Vega strategies last week must have reaped lot of benefits.

Trendline Support for the Sensex is at 18374. Trendline Resistance is at 19508.

Trendline Support for the Nifty is at 5637. Trendline Resistance is at 5895.

For the week ahead, Sensex will find Support at 18687-18469-18255 and will find Resistance at 19186-19479-19767.

For the week ahead, Nifty will find Support at 5643-5548-5460 and will find Resistance at 5815-5899-5990.

INDEX LEVELS: 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

5460

5548

5643

5719

5815

5899

5990

Sensex

18255

18469

18687

18918

19186

19479

19767

LAST WEEKS RECOMMENDATIONS:

All the recommendations did well considering the volatility in the market except for DLF and McLeod Russell which could not reach their respective targets. But the star performer for the week was Tech Mahindra which went up by around 7%!!! 

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Infosys

2840

2906

2969

125

Rs.16,125

TechMah

1039

1084

1112

250

Rs.18,250

Buy DLF

281

289

287

1000

Rs. 6,000

Buy HCL

720

736

736

500

Rs. 8,000

McLeod

382

396

386

1000

Rs. 4,000

Total

Rs.52,375

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell IndusInd

401

408

390

379

Sell KtkBnk

136

139

131

126

Sell PFC

191

194

186

181

Sell AdaniEnt

211

216

203

195

Sell TataChem

325

329

319

312

WATCH OUT FOR:

Karnataka Bank

Disclaimer : The recommendations made herein do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein will be profitable or that they will not result in losses. Readers using the information contained herein are solely responsible for their actions. Information is obtained from sources deemed to be reliable but is not guaranteed as to accuracy and completeness.

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