Nifty Weekly Outlook (14th to 18th March 2011)

From 5538.75 to 5445.45, NIFTY lost almost 93.30 points and ended in Red last week on Friday (11^th March 2011) at 5445.45 losing almost around 1.69% as compared to the last week’s closing of 5538.75. It was a very range bound session for whole of the week, supported by dismal volume. In the starting of the week, NIFTY witnessed a Gap Down Opening of almost 55-60 points due to, continued uptrend in Crude on concerns that crisis in Libya would spread to the oil producing neighbors and due to political instability after six ministers from DMK, a key ally to the congress said that they will meet the Prime Minister and hand over their resignation letters. It may be said that for the first three days, Markets were trading according to the movement in Crude Oil Prices. On Thursday, it was again a Red Trading session all over the globe due to negative Global Cues. China came out with its Budget Deficit, which was highest in last seven years and also Moody’s downgraded Spain’s Government Bond Rating, which again created a Doubt over Spain’s Debt and a selling pressure build up. On the last trading day, NIFTY witnessed a heavy selling pressure facing a dual effect of Poor IIP (Index of Industrial Production) Data for the month of January and also due to the powerful earthquake that rocked Northern Japan. The January 2011 IIP Data were better than markets’ expectations on Monthly Basis, but at the same time were poor on Yearly Basis. The January IIP Numbers were at 3.70% Vs 1.60% (MoM Basis) and April-January IIP Numbers were at 8.30% Vs 9.50% (YoY Basis). A bit of value buying was also witnessed in the INFRA Stocks. BANKING, FINANCE, METAL, TEXTILE, AUTO, CONSUMER GOODS and CAPITAL GOODS witnessed a Selling Pressure, all this led NIFTY to the week’s low of 5408.45. A dismal volume was also witnessed in the markets at the same time, which helped NIFTY to move the week’s high of 5563.30. Finally after witnessing a total News and Data driven movement for whole of the week, it ended at 5445.45.

Last Week, Net Selling of Rs. 64.77 Crore by FIIs whereas Net Buying of Rs. 239.32 Crore by DIIs was witnessed in the Cash Segment.

Technically, NIFTY has made a Short Black Candlestick. If a look at chart is taken, NIFTY seems to be moving in a range since last five weeks and at the same time a Negative Divergence can also be witnessed in sync with RSI (Relative Strength Index), which signals a southbound movement in the markets in the coming weeks. 5600 is a Crucial Resistance for NIFTY to cross on the closing basis, which proved right for the second time. Three weeks ago too NIFTY tried to cross the same level and reverted sharply by making a high of 5599.25. It has turned above its 20-Days EMA of 5474.95. NIFTY has closed below the last week’s closing, signaling a bit of selling pressure still left to come. NIFTY tried to cross its 40-Days EMA (Exponential Moving Average) of 5584.20, but could only make a high of 5563.30 and closed at 5445.45 (much below the 40-Days EMA).

Markets are now eagerly waiting for the Monthly Inflation Data (due to be announced on Monday) and for the RBI’s (Reserve Bank of India’s) mid-quarter review (due to be announced on March 17). Inflation control is expected to remain the central bank’s focus in its mid-quarter review this time.

Unless, NIFTY gives a positive closing above the levels of 5670, Investors are suggested to avoid making investment in the Markets right now and wait for the right direction for the market and Traders are suggested to trade with the market trend in the markets by following Strict Stop Losses.

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.

On the Global front, in ASIA, The aftermath of the devastating earthquake in Japan is likely to draw most investors' attention in the coming week. Policy moves ranging from a supplemental budget to monetary easing are on the table. The Bank of India will also be meeting, and expected to raise rates to keep inflation under control. In EUROPE, Deutsche Lufthansa reports earnings, Royal Dutch Shell holds strategy day and eurozone inflation data is due.

For the next week, the levels of 5650 & 5780 will act as an important resistance, whereas the levels of 5350 & 5200 will act as an important support for NIFTY.