Strong & Weak futures
This is list of 10 strong futures:
NDTV, BEL, Andhra Bank, CESC, Sun TV, Dr.Reddy, Jindal Steel, IVRCL Infra, Nagar Const & TTML.
And this is list of 10 Weak Futures:
M&M, Tulip, Jindal Saw, Havells, Voltas, Uni Tech, BRFL, Ansal Infra, Bhushan Steel & Purva.
Nifty is in Down Trend.
Weekly Index Outlook
Sensex (8965.2)
Vigorous fire-fighting is on across the globe with central banks slashing interest rates blindly and stimulus packages being doled out all around in a bid to reduce the impact of recession. If reaction of equity markets in respective countries to such measures is anything to go by, any euphoria induced by the package promised to us over the weekend is not likely to last beyond a day.
One positive factor to be noted in the charts of most global indices is that they are still holding well above their October lows. That keeps the door open for a Santa Claus rally to jingle through equity markets in the second half of December. Trading was extremely lackadaisical with very low volumes in both cash and derivatives market. Open interest in the futures and options was abysmal, below Rs 40,000 crore, implying lack of conviction among traders.
It was status quo in the Sensex last week with the index scarcely budging beyond the narrow range defined in the previous week. Momentum indicators in the daily chart are displaying positive divergence signalling that the index can move higher in the near-term. Weekly oscillators are however still very weak reflecting the bleak medium-term picture.
It needs to be borne in mind that the trend along long-term, intermediate term and short-term time-frame is down. The medium-term trend is however sideways and the range that is envisaged for this period is between 8000 and 11000. The index is pausing close to the lower boundary and moving sideways is a very lacklustre fashion.
As explained last week, an upward reversal from here will take the index higher towards 10323 or 10945 again. Conversely, a close below 8500 will mean that the down-move that began from 10945 is unfolding its third leg that has the targets at 7715 and 6794.
We have a neutral view on the prospects of the week ahead. The resistances would be at 9970 and 10500 where the 50 day moving average is positioned. A close above 10500 can usher in a move to 11564. Supports would be at 8500, 8316 and 7697.
Nifty (2714.4)
Nifty too trudged sideways between 2550 and 2850 last week. A spurt in the early part of next week will take the index up to 2958 or to the 50-day moving average at 3150. A reversal below the first resistance would provide the opportunity to initiate fresh shorts in the index.
However, if the Nifty declines below 2500, it would imply that the down move from the 3240 peak has resumed and the downward targets in this case are at 2365 and 2083. The preferred view is that the index moves sideways between 2500 and 3500 over the medium-term.
Global CuesNervousness returned to financial markets as recession was officially declared in the US. This caused a sharp plunge of around 8 per cent in Dow Jones Industrial Average (DJIA) and the S&P 500. The decline, however, did not sustain beyond a day and the indices continue to hold firmly above their late-October lows. Unless the S&P 500 declines below 800 and the DJIA below 8000, the short-term view remains positive.
Most indices are moving in a broad range since the last week of October and a sharp move is possible in either direction once the breakout happens. CBOE Volatility index however spiked to 60 and the CRB index representing a basket of commodities plunged 10 per cent lower indicating that de-leveraging has not ended yet.
What is more, the CRB index is now below the key support at 356. Unless commodities turn around next week, the losses in this segment can widen considerably. Nymex crude prices fell to $40/1000 barrels on Friday. There is support at current level on the long-term charts. The next support for the commodity is at $25. —FII DATA
05/12: -4.52 Cr. (Prov)
DII
05/12: -184.02 Cr. (Prov)
NIFTY SPOT LEVELS FOR TOMMOROW 09.12.08
 | 2714.40 | ( -2.64 %) | -73.60 |  |
| 1 | 2 | 3 | ||
| Resistance | 2789.92 | 2865.43 | 2909.72 | |
| Support | 2670.12 | 2625.83 | 2550.32 | |
 | 8965.20 | ( -2.87 %) | -264.55 | | |
| 1 | 2 | 3 | |||
| Resistance | 9232.47 | 9499.73 | 9658.78 | ||
| Support | 8806.16 | 8647.11 | 8379.85 | ||
Infosys
It was a disappointing show by Infosys last week and the stock was unable to move beyond Rs 1,300; tumbling to Rs 1,121 instead. Immediate support for the stock is at Rs 1,100 and below at Rs 1,050. But as we have been reiterating, the stock has key long-term support at Rs 1,100 and the current sideways move could be a consolidation before the stock launches its next long-term upmove. Long-term investors need not fret as long as it holds above Rs 950.
Though the short-term trend is down, there can be a sharp rebound from the support at Rs 1,100 and the stock can move higher to Rs 1,300 again. But this uptrend will sustain only if the stock manages to surpass the 50-day moving average positioned at Rs 1,300.
Maruti Suzuki
MUL recorded a very sharp reversal in the early part of last week that took it slightly below the near-term support at Rs 475.
A feeble recovery is currently in progress. Short-term resistances would be at Rs 512 and then Rs 548.
Inability to move above the first resistance will pull the stock lower to Rs 446 again.
The medium-term view stays neutral since the stock closed the week above Rs 475.
The current medium-term range for the stock is between Rs 450 and Rs 750.
Weekly momentum indicators are displaying weakness. But a weekly close beyond either boundary is required to set the long-term direction in this stock.
SBI
State Bank of India moved in line with our expectation, sliding down to an intra-week trough at Rs 995 and gaining more than 20 per cent from there.
As mentioned earlier, Rs 1,000 is a key long-term support for the stock since it occurs at 61.8 per cent retracement of the entire long-term up trend from the September 2001 trough.
Consolidation between Rs 1,000 and Rs 1,500 is a positive from the long-term perspective.
The short-term trend in the stock is up. But the stock faces strong resistance in the band between Rs 1,200 and Rs 1,250.
Inability to get past this band will pull the stock lower towards Rs 1,078 or Rs 995 again.
Reliance
RIL remained in the range between Rs 1,050 and Rs 1,200, within which it was confined the previous week as well. The short-term trend in the stock is indeterminate and it would be best to wait for a breakout beyond either boundary before initiating fresh trades.
Long-term trend line at Rs 1,000 will be a good support in the near-term. Penetration of this level would drag the stock lower to Rs 880 or Rs 720.
The medium-term view too remains neutral and the preferred view is a move between Rs 950 and Rs 1,500 for a few weeks.
According to this view, the stock could move higher towards Rs 1,370 and Rs 1,500 over the medium-term.
ONGC
The positive short-term trend was nullified by the sharp decline recorded last Tuesday. The stock could move lower to Rs 621 or Rs 598 in the near term. But the key long-term support band between Rs 570 and Rs 600 will continue to attract buyers. Long-term investors can use declines to buy the stock with a stop at Rs 550.
Short-term resistance for ONGC would be at Rs 728 and then Rs 738. Short-term traders can initiate fresh short positions on a reversal from either of these levels with a stop at Rs 750.
Key medium-term resistance stays at Rs 800 and risk-averse investors can wait for a weekly close above Rs 800 before buying it.
Tata Steel
There was a strong reversal from the trough at Rs 146 last week and contrary to our expectation, the stock moved higher to the peak at Rs 193.
A strong bullish engulfing candle was formed in the weekly chart and this spike was accompanied by a spurt in volumes as well.
The rally can sustain to pull the stock higher towards Rs 212.
Downward reversal below this level would mean that the downtrend would resume to pull the stock lower towards Rs 146 again.
Conversely, a move beyond Rs 212 would bring the next target at Rs 250 in to play.
Medium-term outlook will turn positive only on a weekly close above this level.
Nifty future likely to stage a recovery
Pointers
Premium narrowed down sharply for Nifty future.
Volatility index weakened but still rules above 50.
The NSE Nifty November future declined 2.18 per cent to end last week at 2711.1 against its previous week's close of 2771.6. It also surrendered its premium in the process and closed at a discount of about three points over the spot.
Outlook
As we had envisaged earlier, the Nifty future has been moving in a narrow band of 2400-2950. Despite weak global cues, Nifty future may see some recovery this week. It faces resistance at 2950, breaching which may take it to as high as3250. However, a fall below 2450 can take the Nifty future to 1880-1950 levels, though in between it may face a minor resistance at 2290-2300. That said, one can take assume an overall bullish view, only if the Nifty future crosses 4350.
India VIX or Volatility Index, which had been hovering around 60-95 point range throughout last month, has now eased a bit. The index, which measures the immediate expected volatility of Nifty, closed at about 52 points. It nevertheless is still quite high and indicates that Nifty may be in for heightened volatility.
Both 2500 and 2600 puts saw a significant drop in open interest positions. While the former shed 5 per cent, the latter witnessed a decrease of 10 per cent in open interest positions.
This suggests the emergence of put writers, and indicates that Nifty may have a strong support between 2600-2500 levels. On the other hand, Nifty December 2900 call accumulated open interest positions, underpinning the positive bias in the market. Even January 3000 call turned active, suggesting that traders expect the Nifty to cross 3000-mark by next month.
Recommendation:Consider the following two strategies:
1) Go long on Nifty future keeping the stop-loss at 2550. We expect the Nifty future to test its resistance.
2) Consider short straddle strategy using 2700-strikes. While the 2700 call closed the week at around 147, the put ended the week at 137.7. This strategy is best suited if one considers the market to move in a narrow range. While the maximum profit in this strategy could be the premium earned, the loss is unlimited. Note that this strategy has been suggested for a slightly longer period. That said, considering the heightened volatility in the markets, we suggest traders only with the wherewithal to stomach the risk involved consider trading in these markets.
Stock futuresTata Steel (182.5)
The stock is crucially placed. It faces resistance at 215 and support at 165.While a move above 215 can take the stock to 248-250 range, a fall below 165 may weaken it to 148-145 level. We expect the latter to happen. Traders, who are willing to take higher risk, can consider going short on Tata Steel futures, keeping stop-loss at 215. Note that the stop-loss can be adjusted suitably to cover the profit.
FIIs trend
The cumulative FII position as a percentage of total gross market position in the derivative segment as on December 4 stood at about 34 per cent. Foreign institutional investors have indulged in alternate bouts of buying and selling during most part of the week. They now hold index futures worth Rs 6,126.88 crore and stock future worth Rs 9,143.61 crore. Their index options holding stood higher at Rs 11,070.33 crore.
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Arvind Parekh
+ 91 98432 32381
