Scandals Continue To Put Pressure on Nifty

Nifty remained under immense pressure for the 4th consecutive week as market was rattled by yet another scandal. This time it was LIC Hsg and other banking institutions that were rocked by bribing scandal. CBI probe into realty companies getting loans from these institutions by paying bribes set the cat amongst the pigeons as various realty and financial stocks went into a tailspin. Friday was particularly bad for many stocks as panic gripped the bourses and marginal calls forced brokers to square off positions. So, we had stocks like Core Projects, HCC, Unitech, Orbit and the likes running for cover. HCC was the worst impacted as it also had to deal with Environment ministry that sent a show cause notice for its Lavassa project. JSPL too had to grapple with environment concern and stock hit a new 52 week low before recovering a bit in the end. Overall, it was yet another negative week for the markets as Nifty lost about 2.3%.

Downward spiral continues as Nifty failed to hold on to even the stronger support levels between 5800 and 5850. The leading sector (banking) has been rocked by various scandals and has been witnessing sharp sell off. Realty remains vulnerable given the current scenario and may be witnessing some kind of capitulation. The global scene also is not positive given the Ireland concerns coupled with Chinese tightening. Technically, the 5800-5850 support has not held as Nifty continues to hit new short term lows. Sensex has a bullish gap at around 18850 that has not been filled as yet and provides some faint hope for the bulls. The levels of 18800-900 could provide some support as the indicators have also reached extreme oversold readings. 19400-500 is a resistance area and till the time market sustains above 19500 it would be prudent not to take aggressively long positions. These are tricky times and it would be advisable to wait for some clarity to emerge before resorting to trading long positions.

However, investors with at least 6 months horizon could utilize panics to buy strong stocks. Nifty has support around 5680-5710 and resistance is seen around 5825-5850.