Monday, August 11, 2014

Sensex trend this week, published in Economic Times section of Navbharat Times

Sensex can continue to trade in a range in current week!
Indian markets continued its movement in the unchartered territory and Sensex crossed 26000 mark in July. It formed 6 consecutive positive monthly close and all the bars have managed to close above the previous month’s low as well. An investor can use this simple concept of bar technique to stay in the trend as long as it continues. Looking at the candle at the end of the month and if the monthly bar manages to protect the lows of previous month the trend will continue to be positive.
Over short term we are seeing some corrective action after the index touched high of 26300. On Friday Sensex fell by 260 points and closed at 25329 levels. On downside 24900 is now an important support. In past week there was increase in Geopolitical tension that resulted in selloffacross the globe.
Indian Rupee a concern:Indian Rupee has been under pressure over past few weeks and touched the level of 61.70 in last week. The depreciation in Indian Rupee is seen across the currency pairs and is a cause of concern. Also in Global markets Dollar index that measures movement of US Dollar against basket of currencies has been constantly rising. This is also one of the reason for pressure on Indian Rupee and unless we see some stability in global markets Indian Rupee can continue to be under pressure. For USDINR, on upside 62 is going to be an important level to watch above which it might put pressure on RBI.
RBI took appropriate measures:In past week RBI maintained its status quo on repo and reverse repo rates but reduced the SLR in order to induce some liquidity in the system. This shows good approach by RBI to take care of economic growth along with fighting inflation.
Result season:The result season has been mixed so far. However, on Friday India’s largest PSU bank - SBI announced its Q1 results which was better than expected. The growth in profitability was seen for the first time in 6 quarters. This should eventually provide some support to the Banking index. Bank Nifty that measures how Banking stocks are performing has been in sideways range post Elections. Bank Nifty index has been moving between 14400 and 15740 post Election results announced on 16th May. This shows that Banking stocks have been consolidating and waiting for some positive trigger. Overall trend remains sideways and break above 15700 is necessary for any positive trend.
Week ahead: During times of uncertainty we have observed defensive sectors like IT, Pharmaand FMCG have performed well. It is advisable to stay with these sectors for investment purposes in case we see some major correction across the Globe. For Sensex24900 is going to be an important support. After the selloff of Friday we can see some consolidation in current week between 25800 and 25000 levels. The medium term trend for Sensex will remain positive as long as 24270 is intact.
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