NIFTY Outlook for the Week 12Dec-16Dec 2011

1. Week gone by at a Glance

• S&P CNX NIFTY for the Week closed down by 3.63%. DEFTY (Dollar Denominated NIFTY) closed the week with 5.5% in negative territory. 
• Exchange Rate USDINR closed above 52 Rs. mark again. 
• GDP Growth Outlook has been lowered to 7.5% (+ or - 0.25%). Lowest in four years.
• FM says Fiscal Deficit Target of 4.5% of GDP would not be met & expectations are there may be slippage to the tune of atleast 10% if not more.
• FDI in multibrand retail has been put on hold after strong opposition from Opposition parties & even allies of UPA.
• EU summit was a partial success, that EU leaders at a time when they are pushed to the wall agreed on new rules for budget discipline.  UK has stayed out after France & Germany did not agree on the concessions that UK asked. So UK along with Hungary are staying out. Czech Rebuplic & Sweeden are still unclear whether to join in or not.

1.1 Performance of Index with Global Peers

India was the second worst performing market after Russia among Emerging Markets.

1.2 Sectoral Performance

All sectoral Indices closed down in Red with exception of IT (which clocked gains of 0.1%).

2. NIFTY Charts

2.1 Weekly Charts

NIFTY faced resistance at the 20 Week EMA of 5100 levels & from there headed downwards to find support at the all crucial level of 200 Week EMA of 4855. Any close below 4850 levels can take us again to the lower levels of 4700-4650.

Indicators: All indicators are indicating bearishness. Slow Stochastic has arrested the fall  & become neutral but is still not looking bullish.

2.2 Daily Charts

NIFTY for the first 2 days of the week was positive but as was pointed in last weeks blog post that volatility can be seen in the latter part of the week. The same thing happened & in last couple of days it sold off close to 250 points (5%). 

Indicators: RSI is below 50 & heading further down, MACD is in Sell Mode by going below 0 line. Slow Stochastic turning to sell mode after reaching overbought levels. NIFTY is below 20,50,200 EMA (Extreme bearishness). Below 4850 we are staring at 4700-4650 levels. Any upmove would be faced with strong resistance at 4960 levels.

2.3 NIFTY Hourly Charts

On Hourly Charts once NIFTY opened gap down it broke the Trendline & so any further upmove would face resistance at the Trendline & also the 200 Hour EMA is at 4960 levels.

Indicators: All Indicators(William's %R, Slow Stochastics) are in oversold region & a bounce to 4950-4960 can't be ruled out. MACD below zero indicating further bearishness

2.4 NIFTY Volume Profile Charts

NIFTY Volume Profile charts shows  Support at 4806 levels & Resistance at 4960 levels.

3. Derivatives

3.1 Options Data - OI

Highest Concentration of Puts is at 4700 Strike with a OI of 82 Lakhs (Previous Week was at 80 Lakhs). 4800 Strike has second highest OI at 59 Lakhs.

Highest Concentration of Calls is at 5100 Strike with a OI of 78 Lakhs (Previous Week was at 50 Lakhs). 5000 & 5200 Strikes too have roughly 60 Lakhs in OI.

Implication: Calls at 5100 levels have been aggressively written (Increase of 50% Week on Week) as Call Writers are confident that 5100 would be tough to break after market started to retreat from those levels. Interesting to note is the OI of 4700 Strike Put has not seen any fresh unwind indicating that Put Writers are confident that 4700 would hold. But any breach of this range of 4700-5100 can bring in a swift move either side.

4. Events & News Makers

4.1 Events

This week Domestically would be an action packed week in terms of the events that are lined up.

• 12-Dec-2011 - IIP Numbers (Estimates are it would be lowest in more than 2.5 years)
• 14-Dec-2011 - Monthly WPI Numbers (Estimates are it would be lower compared to previous month)
• 15-Dec-2011 - Advance Tax Numbers for Q3 (Sectors to watch out for is Auto - due to encouraging sales numbers & FMCG - Strong Rural Demand, Banking as a sector may disappoint with low credit growth & hence lower taxation.
• 16-Dec-2011 - Mid Quarter Monetary Review by RBI (Expectations are of atleast 25bps cut in CRR)
• Globally, on 13-Dec-2011 US - FOMC Rates decision. 

4.2 News Makers

• The news flow on Telecom 2G spectrum scam is not going too well with the Telecom stocks. Bharti Airtel & Idea lost 8.9% & 10.9% respectively in this week & are looking weak. Bharti has strong support at 354 & Idea has strong support at 85. Any close below these levels can take stocks down by another 5 to 10% atleast.
• The confidence on the Government is at all time low & there are pressures that are building up from Opposition as well as common public (angered with high inflation & corruption in the system). UPA has its back to the walls. It's now or never for them & would be interesting to watch the Policy action from the government. They tried to bring in FDI but was met with fierce opposition. Lets wait what tricks they have in their bag. Have a feeling that Government may take up some policy action soon & create a better environment for Divestment of PSU's.

5. Bottom Line

• With so many economy related events due in this week, the movement of the NIFTY would be dictated by these numbers.
• On Daily, Weekly Time Frame there is still weakness & indicates that NIFTY can move downwards. On Hourly NIFTY is oversold & can expect a bounce to the magnitude of 50-80 points.
• Strong resistance at 4960 levels & Strong support at 4806 levels. So these two levels would act as Trend deciding factors.

NIFTY Supports & Resistances - 4700 <- 4750 <- 4800 <- 4850 <- 4863 -> 4960 -> 5050 -> 5100 -> 5169