Nifty Weekly Outlook (27th September to 01st October 2010)

Last Week ending on Friday (24^th September 2010) NIFTY gained almost 2.27% and closed strongly at 6018.30 as compared to the last week’s closing of 5884.95. After giving a strong breakout from its Bullish Consolidation Pattern, NIFTY kept its northwards movement on by again making a White Opening Marubozu Candlestick on the weekly charts. Last week, on Wednesday, NIFTY took a leap and recaptured the magical 6000 for the first time since January 15, 2008. Highest turnover of Rs. 8768.95 Crore in the Cash Segment was witnessed. Last week, NIFTY made a new 52-Week High or say 40-Months High of 6037.40, with BANKNIFTY trading at its life time high. NIFTY maintained its exorbitant run up without any pause, that too with a good sectoral cycle like CEMENT, METALS, REALTY & INFRA, BANKING & FINANCE, IT, FMCG, PHARMA, TEXTILE, AUTO, OMCs and SUGAR. The government on Thursday doubled foreign investment limits in government securities to $10 billion from $5 billion and increased the limit for corporate bonds to $20 billion from $15 billion.

It said that it believes the move will help to raise investment in bonds, infrastructure and develop bond markets in India at the same time as balancing its monetary policy. For the week NIFTY made a low of 5885.05. NIFTY has moved much above its 40-Days EMA (Exponential Moving Average) of 5458.07 and the 20-Days EMA of 5196.32.

A continuation of the same northwards movement is expected with an excellent buying action of FIIs (Foreign Institutional Investors) again with a Sectoral Cycle. Also the Verdict of Ayodhya Issue was deferred by the Supreme Court to 28^th September, 2010 from 24^th September. It will be a hearing on that day on the same Issue, which may rose a communal tension leading to disturbance on the Political front. Hence, traders are suggested to trade cautiously by following Strict Stop Losses and avoid making fresh investments at this point of time.

All the major International Indices after facing resistance are now trading near their important support levels, now from these levels a good bounce can be expected, or if the support breaches, a correction can be expected in the near term.

On the Global front, in US, reports on home prices, consumer confidence, Chicago PMI and revised GDP data will be in focus. A string of economic announcements will hold investors' attention in Europe for much of the week, with the latest figures on U.K. GDP, European Economic sentiment and German retail sales all having the potential to move markets.  

For the next week, the level of 6100 & 6130 will act as an important resistance, whereas the level of 5900 & 5875 will act as an important support for NIFTY.