Bottom Line: It seems over past 1 week the
movement of Nifty is dwarfed by the strong depreciation in INR.
INR pairs
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Currency
worries:
The above charts are picked up from the currency research “The Forex
Waves”. It needs little explanation and clearly shows the depreciation of
INR in real sense. The sharp up moves in USDINR, GBPINR, EURINR and JPYINR
clearly shows the vulnerability of Indian currency. This movement has happened
despite of FII inflows, Dollar index weakening i.e. US Dollar falling against
basket of currencies, Equity markets haven’t yet shown strong downtrend. If any
of these parameters reverses then we have our doubts that even RBI intervention
will be of much help. We are living in interesting times and the major trend
for INR pairs has changed to upside. Short term consolidation or pull back is
not ruled out. We have been on the right side of the trend as soon as USDINR
broke above 54 levels few weeks back!
Nifty daily
chart:
Nifty 60 mins
chart:
Wave Analysis:
In previous
update we have mentioned, “In short, as long as prices move below
5850/5860 our favored view is negative and prices can move lower towards the
immediate support of 5760/5750. Further, move below 5750 will accelerate the
selling pressure.”
Nifty
continued to move exactly as expected. Prices are failing to stay in positive
territory and closed at 5760 levels. After a brief consolidation over last week
the selloff has been very prominent in Midcap and Smallcap sectors.
It is normally
observed that Equity markets lead the currency markets but this time it seems
it is working the other way as shown in above currency charts. European markets
are already showing strong reversal signs followed by Japanese and Chinese
markets. It seems the world is now turning together but we will wait for more
price confirmation to comment that the major top in world equity markets is in
place.
As shown on
daily and 60 mins chart, prices formed a classical Head & Shoulder
distribution pattern and moved below the neckline. Bank Nifty was the first
index to show this pattern and is leading the fall this time. Prices are
currently moving in downward sloping red channel and the selling pressure looks
to be accelerating. So far prices have taken out the previous up moves in
faster time thus giving us early warning the trend has changed to downside.
Positional
short positions can now use 5840 as stop loss on closing basis and ride the
trend on downside. 5620 – 5640 is the level where we can have some supporting
activity but we would refrain to come in path of strong downtrend and will
observe how prices react from there. Any move below 5500 will be a strong
confirmation that prices are headed towards 4700 levels!
In short, the
trend continues to be negative for Indian markets as long as 5900 level is
protected on upside.
To subscribe to this daily research report that gives view on Nifty and Elliott wave counts on 3 different stocks write to helpdesk@wavesstrategy.com or visit www.wavesstrategy.com
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