No Respite From All Around Selling

Market opened on a flat note but saw huge selling immediately especially in stocks like Tata Motors whose monthly sales figures disappointed the markets in a big way. Yesterday’s gainers like Bank of Baroda, Canara Bank and SBI gave up all its gains. Weakness and heavy selling by FIIs in Tata Motors and Reliance broke the strong Nifty Support of 5425 and the market finally closed on a very weak note. The factors which are affecting the market in a big way are the macro concerns like interest rates, inflation figures and serious governance deficit which has weakened the sentiments in a very big way. ADAG stocks witnessed fresh bouts of selling as Reliance Infra closed below Rs.700 and Reliance Capital made an intraday breach of Rs.500. Titan made some brave attempts to rally but that too faced a lot of resistance around 3650 levels. The only stocks which showed some decent buying were HDFC and HDFC Bank.

There is very little one can do at this stage and hence it would be prudent to stay on sidelines. Bottom picking the market would be like catching a falling knife. Hence, we are of the view that one should not invest fresh money in the market till the time markets make a higher bottom at least on the hourly charts.

Nifty will now face strong resistance at 5450 and 5485 levels. It might find some support around 5350 levels and if this level is broken, the next important support lies only at 5295-5310 levels.

RBI Policy Induces Heavy Selling

Market gave up all its early morning gains on account of heavy selling in key heavyweights after the announcement of RBI policy. RBI raised interest rates by only 25 bps but remained committed on tightening as inflation control remained its top priority. Banking stocks rallied initially but failed to sustain higher levels. The Auto counters also encountered selling in the late trades. Nifty lost more than 100 points from its intraday top and closed below 5700. In fact, Nifty gave up all its gains of past 3 sessions. Global cues are positive and that may keep some positive bias as the markets re-open on Thursday. Nifty is likely to see expiry just around 5700. Banking stocks have seen some technical rebound and it seems that there is still some steam left in the rebound. One could utilize any weakness to accumulate the banking counters like SBI, ICICI, Yes Bank, BOI, BOB and Allahabad bank.  Auto stocks remain weak and are a typical sell on rallies stocks. Tata Motors has some support around 1150 and close below 1150 could further weaken its technical set-up. HUL lost more than 5% after its quarterly numbers. Stock closed below 290 and sustained trades below 290 could mean more weakness in this heavyweight. RIL finds some support around 950 and has held this support for past 24-30 months. Positional traders could buy RIL on weakness with perspective of 4-6 weakness. Tata Steel has some resistance around current levels of 655-660. Short covering might sustain it around current levels on Thursday but some correction is expected after January expiry.

Nifty has immediate support around 5650 and then around 5610 while resistance is at 5740-50.

Positive Global Cues Fail To Prop Up Markets

Markets failed to respond to the positive global cues as local factors dominated the proceedings. Food inflation came in at a high of more than 18% and that largely spooked the marketmen. The interest rate sensitives that were already under pressure further bore the brunt on fears of impending RBI action. Banks, Realty and Autos continued to lose ground on sustained selling. SBI and ICICI bank fell to almost 4 months’ low. Bajaj Autos and Tata Motors led the decline in Auto stocks. Fertiliser stocks expectedly reacted negatively to the postponement of Urea policy and were amongst the leading losers for the day. Chambal and NFCL lost more than 7% each. Some other names on the losers’ list were BGR Energy, Escorts, Ultratech Cements, Praj, Ambuja, TVS Motors, EKC, Unitech, HOEC, Dish TV, BOB, Bombay Dyeing, JSW Steel and Nagarjuna construction. IT heavyweights did provide some support to the indices as did RIL. Even some banks also managed to buck the overall negative trend and posted some gains. Some prominent gainers were Jain Irrigation, KTK Bank, Sun Pharma, Ind Hotels, Jet, Hindalco( new high), TCS, IRB, Petronet and Bharti.

Nifty continued to slide and severely tested the support at 6030-6040 and barely managed to close above this zone.  Market has retraced around 33% of the rally from recent lows of 5720 and there is a high probability that it would find some support around current levels. Banks have been under pressure for almost 6 weeks now and current down leg could be the last one before a sustainable support and rebound is seen in most banking counters. This might coincide with the expected hike in interest rates by RBI. What this means as a trader is that one should be prepared to close shorts and perhaps go long in banking stocks once the hike is announced.  Some other stocks that look good for next few sessions are Ind Hotels, Hindalco, Petronet, IRB( above 234), Bharti, RIL, Tata Steel and NCC.

Nifty has immediate support around 6025-30 and then around 5980 while res is around 6085-6100.