This is list of 10 strong futures:
TTML, Hind Petro, Glaxo, IOC, BPCL, GTL, NTPC, Sterlin Bio, Power Grid & Hind Zinc.
And this is list of 10 Weak Futures:
Parsvnath, Rel Capital, HDIL, Orchid Chem, Gitanjali, Purva, Matrix Labs, Ansal infra, Amtek Auto & Uni Tech.
Nifty is in Down Trend.
FII DATA
-705.56
46.22
Weekly Index Outlook
Sensex (8915.2)
The incessant pounding of negative tidings from overseas pushed the Sensex back towards the 8000-mark last week. There are multiple swords hanging over the market's neck: Detroit automakers tottering on the verge of bankruptcy, the dire state of Citigroup, major economies slipping in to recession — to name a few. The desperation of the investors is amply reflected in the euphoric rally on Wall Street on Friday greeting the appointment of a new Treasury Secretary.
Sensex recorded an intra-week trough at 8316 on Thursday and just when everyone had braced themselves for an inevitable plunge below 8000, it reversed smartly on Friday afternoon. Derivative volumes were high on Friday implying that short-covering could have been the prime reason for the surge. The expiry of the November contracts next week could see the rally extend a few more sessions. Low open interest below Rs 50,000 crore is a positive.
The reversal on Friday, though heartening, has not changed the short-term outlook, that remains downwards. The momentum provided by this reversal can take the index higher towards 9320 or 9940 in the short-term. However, if the index does an about-turn in the early part of next week and fails to surpass the first resistance, it would imply that the down trend would resume to take Sensex down towards 7600 again.
The long-term support levels in the immediate vicinity are the October 2005 trough at 7657 and March 2005 peak at 6882. We have also explained that the next target of the third wave from the 21,206 peak is at 6887. These are the levels that we will look at, to buttress any sharp decline in the near future.
The most likely movement over the medium-term is a range-bound move between 7500 and 11000 as the index garners strength to fight back.
The upper targets for the week ahead are at 9320 and then 9941. If the second resistance in surpassed, a move towards the recent peak at 10945 would be possible. Supports can be expected from 8300 and then 7690.
Nifty (2693)
Nifty reversed from an intra-week trough at 2503 on Thursday. The index can move higher to 3167 or 3765 next week. However, if it fails to move past 3167, it would imply that weakness would resume and pull the index lower to 2502 or 2252 again.
The medium-term outlook for the index is neutral. A sideways move between 2200 and 3400 is likely over this timeframe. Long-term support levels to watch out for are the October 2005 trough at 2300 and March 2005 peak at 2183.
Global Cues
The down-trend that commenced in the first week of November continued to chip away at the global indices. Many of them breached their October lows while some are hovering close to these levels. CBOE volatility index spiked to 80 again implying that the state of investor's nerves was as taut as it was in the last week of October.
Dow Jones Industrial Average gave everyone a scare by plunging to 7506 on Thursday. But the index closed the week above the 8000 mark. The 2003 and 2002 troughs at 7416 and 7197 are the immediate support levels for this index. The S&P 500 appears weaker than the DJIA since it declined below 2002 trough last week. But it needs to be remembered that these are long-term trend deciding levels so we need more than two weekly closes below 760 to pronounce the end of the structural bull market in this index.
Commodities did not fare any better. CRB index is hovering at 350; the level recorded in late October. Penetration of this level will drag the index another 15 to 20 per cent lower. Crude was one of the worst affected and declined to $49, as indicated last week. The next short-term support is at $46.
Reliance Ind
Reliance Industries moved lower in line with our expectation towards the intra-week trough at Rs 1,021.
But the last-hour surge on Friday resulted in the stock ending the week on a flat note.
As we have been reiterating there is a strong medium-term support at Rs 970 and the stock can spend a few months in the band between Rs 950 and Rs 1,500.
A short-term trough might have been formed at Rs 1,021 last week.
The stock could move higher to Rs 1,200 or Rs 1,322 in the near-term.
Inability to move past the first target would be sign that the Rs 970-support would be tested again in the near-term.
ONGC
ONGC moved lower as indicated in this column last week. But the decline halted near the support at Rs 600. The stock has key long-term supports at Rs 620 and below that at Rs 550. Though the lower support was tested on October 27, the intra-day recovery made the stock close above Rs 600 on that day. A long-term trough is possible for the stock in the band between Rs 550 and Rs 600. The medium-term view will, however, turn positive only on a close above Rs 900.
The stock can move higher to Rs 736 in the near-term. Short-term traders should watch out for a sharp reversal from this area. If this level is surpassed, the rally can extend to Rs 810.
SBI
The 9 per cent surge in SBI in the second half of the trading session on Friday has made the short-term outlook positive for the stock.
It is obvious that the third leg of the correction that is on since October 27 has commenced from the Rs 1,025-trough.
This wave can take the stock higher to Rs 1,245 or even Rs 1,370 again.
Inability to move beyond Rs 1,245 would mean that the pull back is unsustainable and the stock can move lower towards Rs 990 again.
The presence of the 50-day moving average at Rs 1,370 makes it a formidable medium-term resistance.
If this level is surpassed, SBI can move on to Rs 1,600 again.
Tata Steel
Tata Steel recorded an intra-week trough at Rs 150 as indicated in this column last week. A rebound is possible from these levels that can take the stock higher towards Rs 190 or Rs 212. If the stock fails to surpass the first resistance, it would mean that a decline towards Rs 135 is possible in the near-term. Fresh shorts can be initiated on such signs of weakness.
A strong rally beyond Rs 212 will take Tata Steel to Rs 250. A sideways move between Rs 150 and Rs 250 is then possible for a few more weeks. However, the medium-term outlook for the stock is very weak and a decline towards the long-term support zone between Rs 100 and Rs 110 is likely over the medium-term.
Infosys
Infosys declined below the near-term support at Rs 1,180 to the intra-week trough at Rs 1,100. As explained earlier, the stock has key long-term support at Rs 1,100 and a sustainable trough can be formed here. The sideways move between Rs 1,100 and Rs 1,450 witnessed since October 10 can be part of a base building move that can be followed by a long-term up-move in the stock. Medium-term view will turn overtly positive on a close above Rs 1,600.
The sharp reversal of Friday can be followed by a short-term rally to Rs 1,240 or Rs 1,320. Failure to move past Rs 1,240 will mean an imminent decline to Rs 1,100 or Rs 1,040 in the near-term. Next long-term support for the stock is at Rs 938.
Maruti Suzuki
MUL tested the support at Rs 475 fleetingly on Thursday before reversing upward. But the short-term trend in the stock continues to be down. Immediate resistances in the week ahead would be at Rs 532 and then Rs 572. Reversal from either of these levels would denote that the stock can decline to Rs 430 or even Rs 390.
MUL has key long-term support at Rs 550, around which the stock is moving since July. The stock could be attempting to form a long-term trough at these levels. But a firm close above Rs 800 is needed to signal that the stock has formed a long-term trough and is on the road to recovery. Next long-term support is at Rs 400 for the stock.
Nifty to remain volatile
Pointers
Premium widens sharply for Nifty future
Volatility index remains firm above 60
Rollover of Nifty future moderate at 15 per cent
Despite a sharp recovery on Friday, the Nifty November future closed a good 3.6 per cent lower over its previous week's close of 2829 points.
However, the day's rally, buoyed by short covering, did help it end at a 30-point premium over its spot, which closed at 2693.45. In terms of rollover, the performance so far has only been moderate. The week saw about 15 per cent rollover in open interest, which is marginally better than that of the last month.
Follow-up
1) We had presented two strategies - going short on Nifty future if it dips below 2700 and short straddle by selling Nifty 2800 call and puts.
Both the strategies would have yielded decent profits. But as recommended, traders can hold the short straddle strategy for one or two days more (ahead of expiry).
State Bank of India: We had advised traders to go short on SBI future keeping the stop-loss at 1265.
Traders would have made windfall profits as the stock price tumbled quite sharply.
Outlook
Notwithstanding the strong close on Friday, we expect the Nifty future to remain under pressure.
It now faces resistance at 2850-2900. A breach of this level can take the Nifty future to 3250 level. On the other hand, if it fails to sustain at current levels, it can re-test its October lows.
Any fall below 2550 has the potential to take Nifty future to as low as 1880-1950.
India VIX or Volatility Index, which indicates the expected immediate volatility of the market, has consistently been hovering around 60-95 point range throughout last week.
This figure is quite high and indicates that Nifty is set to witness heightened volatility both during the week and in intra-day trades. But for the week it closed marginally lower at 66.46.
For the forthcoming week, we expect Nifty to open on a positive note. However, considering that it is also the settlement week for November derivative contracts, traders may have to brace themselves for sharp volatility in the markets.
Recommendation
Traders may have to exercise more caution as markets are likely to remain quite choppy and volatile in the coming weeks.
Traders with a penchant for risk however can consider going long on Nifty future keeping the stop-loss at 2495. As long as 2550 is not broken, the Nifty future has the potential to go up.
The stop-loss has been given at quite distance intentionally.
However, if the Nifty future opens with a huge gap of over 100 points, traders are advised to stay away from the market as 2850-2950 appears a vulnerable range which may cause sharp swings.
Stock futures
ONGC (687.65): The stock witnessed a sharp recovery from Friday's low level.
The future closed in a premium at 691 and saw a sharp build up in both November and December futures. Interestingly, a chunk of the build up in positions was on the long side. The stock may see a sharp recovery from hereon. It may find support at 640 levels and may face a resistance at 785. We feel the current rally has the potential to take the stock up to its resistance level.
Traders can consider going long on ONGC with a stop-loss at 640.
FIIs trend
The cumulative FII positions as percentage of total gross market position on the derivative segment as on November20 decreased to 36.54 per cent. Foreign institutional investors have been net sellers during most part of the week. They now hold index futures worth Rs 7,939.65 crore and stock future worth Rs10,688 crore. Their index options holding stood higher at Rs 13,523.79 crore.
- Arvind Parekh
+ 91 98432 32381
