Nifty Weekly Outlook (22nd to 26th November 2010)

Last Week ending on Friday (19th November 2010) NIFTY ended in red at 5890.30 with the loss of around 3% as compared to the last week’s closing of 6071.65. After making a life time high on the closing basis, NIFTY has witnessed a severe correction of almost 7% or say of 422 points. Last week was quite volatile for NIFTY, with series of negative news domestically and globally. Unveiling of 2G Spectrum Allocation Scam and a dramatic downturn in SKS MICROFINANCE’s collections led to a good selloff in TEELCOM, BANKING & FINANCE Sectors. Apart from this, Textile Units across the country have gone on a strike against the extreme increase in cotton prices, which led to a selloff in TEXTILE Sector. On the Global Front, lifting of rates by The Bank of Korea by a quarter-point to 2.50%, and hiking of reserve requirement ratio by 50 BPs by Peoples Bank of China (PBOC) to combat inflation led to a selloff in the Markets all over the globe. China also limited investment in real estate by foreign individuals and companies. Foreigners will be limited to a single residential property unit and companies will be permitted to purchase only commercial properties they intend to use. The rules are in addition to existing curbs imposed by some Chinese cities which restrict real estate investments by foreigners to a single property outside their principal residence. Apart from these, the debt worries in Ireland also invited bears to dominate the markets all over globe. Last week, NIFTY made a Bearish three Outside Down Pattern, which confirmed the formation of Bearish Engulfing Candlestick Pattern, formed last week. For the week, NIFTY made a high of 6144.05, while a low of 5890.30. NIFTY is approaching slowly and slowly towards its 40-Days EMA (Exponential Moving Average) of 5522.61 and has breached the 20-Days EMA of 6097.40.

NIFTY may now drag to the levels of 5600/5500 in the coming weeks with TELECOM, REALTY & INFRA, BANKING & FINANCE, TEXTILE, OIL & GAS, METALS and IT Sectors in pressure.

Majority of the International Indices have retraced back from their important resistance levels after touching them, raising the expectation of more of a correction in next coming weeks, hence a cautious approach is recommended while trading in the markets. Traders are suggested to trade cautiously by following Strict Stop Losses and avoid making fresh investments at this point of time.

On the Global front, in Asia, Japan will release its October trade report this week, while Thailand, Malaysia and the Philippines will all release third-quarter GDP data. In Europe, German economic data will be in focus next week, with third-quarter gross domestic product and the Ifo business-climate index on tap. In US, PC giant, HP will report fourth-quarter earnings. Also there's a raft of economic data, including home sales, jobless claims and consumer spending.

For the next week, the levels of 5980 / 6040 / 6150 will act as an important resistance, whereas the levels of 5780 / 5700 / 5640 will act as an important support for NIFTY.