Nifty Weekly Outlook (23rd to 27th January 2012)

From 4866.00 to 5048.60, NIFTY gained almost 182.60 points and ended in Green last week on Friday (20^th January 2012) at 5048.60 gaining almost around 3.75% as compared to the last week’s closing of 4866.00. It has been an action packed week for Indian equities and corporates right from the start. Bulls continued to dominate for the third consecutive week. All the sectors cheered along this week, and the broader market also participated, with mid-caps and small-caps rising between 1.5-2.5%. Fall in core inflation, indications of interest rates peaking out and better-than-expected third quarter earnings helped boost sentiment, encouraging investors to put money in stocks. Even foreign investors lent a hand to the market, with FIIs increasing their exposure to Rs 5500 Crore. These were some of the reasons for the upside witnessed last week in the markets. December inflation came in at 7.47% versus 9.11%, MoM. A data earlier showed China's gross domestic product growth slowed slightly in the fourth quarter to 8.9%, but surpassed market expectations of 8.6%. Industrial output growth in the world’s second largest economy during December also accelerated to 12.8% from a year earlier, above 12.4% growth in November. International Monetary Fund's (IMF) plan to expand its lending resources to counter Europe's debt crisis, bolstered investor confidence across the globe. NIFTY crossed all its important resistances of 4950/5000 very swiftly. It made a high of 5064.15, whereas a low of 4827.05 for the week. Stock specific and Sector specific buying was witnessed as Results Season has arrived and also many of them witnessed Buying at bottom levels. Finally after witnessing a volatile and wholly upside movement for whole of the week, it ended at 5048.60.

Technically, NIFTY has made a Long White Candlestick Pattern, which led to the formation of Bullish Three White Soldiers Candlestick Pattern. This pattern is indicative of a strong reversal in the market. Bears are now forced to cover short positions. The reliability of this pattern is very high, but still a confirmation in the form of a white candlestick with a higher close or a gap-up is suggested. If a look at Chart is taken, a negative crossover between 100-Days SMA (Simple Moving Average) and 40-days EMA (Exponential Moving Average) is still intact. An Extension Level is being drawn from the Low of 2539.45 (week ended 06^th March, 2009) to the life-time high of 6338.50 (week ended 05^th November, 2010), of which NIFTY has crossed the strong resistance level of its 38.20% Extension level of 4887.26, which it was facing for more than a month period. On the other hand, it is taking an immediate support of 4635 level and also a strong support of its 50.00% Retracement level of 4438.98. NIFTY has also crossed the trendline marked from November, 2010 on closing basis, which was till now acting as a good resistance level for it. The level of 5150 is acting as an important resistance for NIFTY. NIFTY is trading below its 40-Days EMA and 100-Days SMA of 5118.21 and 5403.03, respectively.

Unless, NIFTY gives a positive closing above the levels of 4950, 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. As mentioned earlier, NIFTY has crossed the levels of 4950 and even 5020 on the closing basis, with an excellent bounce in the Mid Cap Stocks, which were trading in the oversold zone before this rally.

FIIs (Foreign Institutional Investors) were the Net Buyers of Rs. 3705.26 Crore while DIIs (Domestic Institutional Investors) were the Net Sellers of Rs. 2110.43 Crore, in Cash Segment for the last week.

If a look at International Markets is taken, all the Markets around the Globe posted good gains and moved above their respective resistance levels, the same was imitated by the Indian Markets too. Still the deepening fear of European Debt Crisis has spread uncertainty in the markets all around the Globe.

On the Global front, in ASIA, stock-market action will be affected by various holidays, which means the spotlight is on central banks in the region, including the Reserve Bank of India, the Bank of Japan and the Bank of Thailand. Australia also will issue inflation numbers. In Europe, The rich and the powerful will travel to Davos, Switzerland, next week for the 42nd annual meeting of the World Economic Forum. Germany's chancellor will give the opening address on Wednesday evening. In U.S., a heavy week of earnings, including reports from Apple, Yahoo, Ford, Netflix and McDonald's, will vie with a two-day Federal Reserve meeting for investors' attention next week.

For the week, resistance for NIFTY comes at 5160 & 5220 levels. At the same time, 4820 & 4780 will act as major support levels.