Nifty Weekly Outlook (29th November to 03rd December 2010)

From 5920.90 to 5751.95, NIFTY lost almost 170 points or say it ended in red in last week ending on Friday (26th November 2010) at 5751.95 with the loss of around 2.3% as compared to the last week’s closing of 5890.30. After making a life time high of 6312.45 on the closing basis, NIFTY has witnessed a severe correction of almost 9% or say of 560 points. Last week was quite eventful for NIFTY, with series of negative news domestically and globally. Two main events, the Korean shelling and the CBI bursting off a bribery scandal decided the course of the market. On Tuesday, North Korea fired dozens of artillery shells at a South Korean island, killing two soldiers and setting houses ablaze, in one of the heaviest attacks on its neighbor since the Korean War ended in 1953. In the other event, CBI arrested Ramchandran R Nair, chief executive officer of LIC Housing Finance for improper loan disbursals and Rajesh Sharma, chairman of MMFS. Money Matters was raided as CBI was investigating irregularities regarding market-related transactions linked to bureaucrats and politicians. The case broke after a year of investigation on Nov. 24 when the Central Bureau of Investigation (CBI) arrested eight people, accusing them of bribery for corporate loans. The arrests included the chief executive of state-run mortgage lender LIC Housing Finance and senior officials at state-run Central Bank of India, Punjab National Bank and Bank of India. While the size of the scandal is not yet known, local media have reported it could run into hundreds of millions of dollars. The Unveiling of this scam led to a big sell off in REALTY & INFRA, BANKING & FINANCE and METALS Stocks. It proved to be a mud slugging case on LIC of India, which shook the trust of Indian investors. A major selling was witnessed in the Companies, in which LIC has good amount of investment. REALTY & INFRA and BANKING & FINANCE Stocks spooked almost 20-30% and 10-15%, respectively in last week. Last week, NIFTY made a Bearish Three Black Crows Candlestick Pattern, which indicates that the Bullish mood of the market cannot be sustained anymore. For the week, NIFTY made a high of 6020.25, while a low of 5690.35. NIFTY is approaching slowly and slowly towards its 40-Days EMA (Exponential Moving Average) of 5533.80 and has breached the 20-Days EMA of 6003.74.

Last Week, Net Selling of Rs. 3467.59 Crore was witnessed in the Cash Segment by FIIs.

A large amount of Margin Call Money was witnessed last week with the F&O Expiry on 25^th of November. Unveiling of Loan Bribery Scam after 2G Spectrum Allocation Scam has shook the trust of investors in the markets, which led to the heavy selling with Panic Selling too. NIFTY has touched the lower trendline (drawn from October 2009) by making a low of 5690.35, which if breached will invite more selling 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. With this note and keeping in mind the ongoing uncertain economic and financial environment domestically too, 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's October production figures will provide further clues about the state of the economy. And in China, a manufacturing survey will give an indication of the country's industrial momentum. In Europe, the European Central Bank will be coming out with its latest interest rate decision. In US, Investors will take the pulse of the consumer economy in the coming week, as the market braces for data from online holiday shopping as well as a fresh look at U.S. consumer confidence. 

For the next week, the levels of 5880 & 5930 will act as an important resistance, whereas the levels of 5650 & 5550 will act as an important support for NIFTY.