The below is the English transcript of article by Ashish Kyal, CMT Director of Waves Strategy Advisors in Economic Times section of Navbharat Times.
Sensex has continued to form new monthly highs and touched the level of 28822 by end of November 2014. As long as prices manage to protect the low of prior month on closing basis the medium term trend will remain positive. November month did not see any strong momentum. Currently prices closed at 28458 which is only 45 points above the level seen in start of November. This shows that some strength is reducing on upside and one should invest only in selective stocks with lower “Price to Earning” multiples and good management.
NSE Advance decline line is a simple technical indicator which shows the overall breadth of the market. Even when Sensex is touching new highs this indicator is moving lower indicating more number of stocks were closing negative as compared to advancing stocks. This is known as negative divergence and it shows only selective number of stocks is taking index higher which are not a healthy sign.
RBI credit policy: RBI kept the key policy rates including repo rate unchanged in the meeting held on2nd December 2014. RBI governor Raghuram Rajan said change in monetary policy stance now would be premature, adding RBI may change stance in early 2015 if inflation falls to 6 percent. This shows that RBI focus still remains on curbing down inflation first even if the overall economic growth might be slow.
Indian Rupee has continued to show relative outperformance since September 2013. Even when US Dollar has rallied sharply over past few months USDINR has managed to trade within the range and protected 63 levels on upside. Indian Rupee has been one of the best performing Asian currencies so far. The important support on USDINR is now at 59.50 and resistance is near 63.Break of either of these levels will start a strong trending move in that direction
Commodity prices: Commodity prices have continued to correct over past few months. Crude Oil touched the lowest level seen previously during 2009. This will help to reduce the pressure on India import bills. However, falling Crude prices is more driven by reduction in Global demand. This will put pressure on companies involved in production, exploration and refinement of Crude oil like Cairn India,Aban offshore.
Week ahead: In a nutshell, looking at the overall breadth, momentum and sector participation we think that the risk has increased for fresh investments at current levels. However, for change of trend there has been no price confirmation and unless we see a close below 27700 levels the medium term trend will remain positive. Another important technical indicator that can be used to understand the direction of market is 10 weeks Moving average. The support as per this average is near 27700 on downside. In current week, move above November high near 28800 is important for uptrend to resume with support of 27700!