Nifty Weekly Outlook (13th to 17th December 2010)

From 5992.80 to 5857.35, NIFTY lost almost 135.45 points or say it ended in red in last week ending on Friday (10th December 2010) at 5857.35 with the loss of around 2.26% as compared to the last week’s closing of 5992.80 on the back of heavy FII year-end selling. Last week after touching the high of 6069.45 on Monday, NIFTY could not sustain the gains and slipped for whole of the week till the last of the week. Major gains on the last day of the week were not sufficient to cover the losses that the markets recorded in the last five trading sessions. The news of Price Rigging by promoters of Small Cap and Mid Cap Companies and the involvement of many brokers in it spread a negative wave all over the markets, which led to a huge panic selloff in Small Cap and Mid Cap Stocks initially and later in Large Cap Stocks too on Thursday. A bunch of stocks were reported to being investigated by CBI. Ruchi Soya, KS Oils, Karuturi Global were suspected of price rigging. The news was that market operator, Vimal Rathod was accumulating shares of these companies on behalf of NRI investor C Shivasankaran (Siva), based on insider information. C Shivasankaran holds stake in Sing Tel which was one of the beneficiaries of A Raja's largesse’s in 2G scam. And once the CBI started unraveling this tight knot, it led to Siva’s other murky operations and thus to Ruchi Soya and KS Oils and Karuturi. He has recently picked up (officially) a 2.99% stake through open market purchases in Karuturi Global. Prior to that, he picked up 11.63% in Ruchi Soya and then 4.29% into KS Oils. A confidence selloff of almost 15-30% was witnessed in these stocks on Thursday. Markets had a bloodbath of Thursday. A good bounce in the markets was witnessed on Friday backed by excellent IIP Numbers for the month of October, which were at 10.8% Vs 4.4% (MoM). For the week, NIFTY made a low of 5721.15. A big selloff was witnessed in REALTY & INFRA, BANKING & FINANCE,  METALS & MINING, CAPITAL GOODS, PHARMA, SUGAR, FERTLIZER, MID CAP and SMALL CAP Stocks in Last Week. Last week, NIFTY made a Bearish Dark Cloud Cover Candlestick Pattern. The confirmation of this formation may be in the form of a black candlestick, a large gap down or a lower close the next week. NIFTY is taking a strong support of 5750 levels, which it is testing since last three weeks. Last week too, it breaches it made a low of 5721.15, but managed to close at 5857.35. NIFTY if breaches the levels of 5750, it will invite more selling pressure. NIFTY is approaching slowly and slowly towards its 40-Days EMA (Exponential Moving Average) of 5570.88 and has breached the 20-Days EMA of 5943.91.

Last Week, Net Selling of Rs. 4744.90 Crore by FIIs and Net Buying of Rs. 1243.51 Crore by DIIs was witnessed in the Cash Segment.

If a look at International Markets is taken, majority of the Asian Indices have retraced back from their important resistance levels after touching them, raising the expectation of more of a correction in next coming weeks. On the flip side, both the European and American Indices have crossed their important resistance levels and have become bullish for the next week. Keeping in mind the ongoing uncertain economic and financial environment domestically, 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, The Bank of Japan's latest quarterly tankan survey is likely to reveal that sentiment among large manufacturers has weakened. In Europe, Inditex results, Punch Tavern update and Italian vote of confidence are on the diary. In US, Tax Cuts, Jobless Benefits, Tech Earnings are on Tap.

On Friday, PBOC (Peoples’ Bank of China) raised the RRR (Reserve Requirement Ratio) by 50 Bps (Basis Points), the effect of which in Asian and Indian Markets have to witnessed on Monday. In India too, the Advance tax Numbers will be announced from 15^th December 2010, which will also lead to Stock and Sector Specific Movement in the next week.

For the next week, the levels of 5940 & 6020 will act as an important resistance, whereas the levels of 5670 & 5550 will act as an important support for NIFTY.