We have drawn trend line joining two significant bottom 3918 and 4786. According to trend line theory next levels of support could be around 5400. Any closing below this trend line may further dampens the current scenario and possibility of getting new lows near to 5200-5250 could be more justified. On the upper side any bounce back from 5400 may leap indices towards 5640-5650 where we might see some profit booking
Same in the Sensex , channel line drawn from the lows of 13219 and 15960 may provide crucial support around 17900-18000. Below this flood gates may open and we might see some drastic fall near to 16000 in a short span of time. On the flip side 20500 could be the key resistance level to watch.
MOVING AVERAGES AND THE CANDLE STICK PATTERN:-
The short term moving average is an indicator of the trend in the near future. The value for the short term moving average (20 DMA) is at 5470 and medium term moving average (50 DMA) is at 5740. Presently, the Nifty trading below20 , 50 and 2000 dma, which would be treated as bearish si signal coupled with oversold territory. Hence possibility of bounce back couldn’t be rule out at any stage though5640-5650 (200 dma) might be the key resistance zone.
FIBONACCI RETRACEMENT:-
Entire rally from the lows of 4786 to 6335 took 25 trading weeks without any substantial correction. If we applying Fibonacci theory and took retracement of this current rally, 50% and 80% retracement stood at 5555 and 5375 respectively. Any break down above this level could open the flood gates and possibility of losing another 100-200 pts should be on higher side. Moreover spot index created some gap on 14/02/211 of more than 30pts which has not been filled yet. Hence we are expecting this gap should be filled in the upcoming week however possibility of bounce back couldn’t be rule out at any stage.
With an exception of the last trading day of the week, Indian benchmarks showed high-spirited performance in four back to back sessions of the passing week as they extended last Friday's pullback rally with bottom fishing in fundamentally strong shares gathering greater force. Markets finally witnessed the much needed relief as they commenced the week with around 500 points rally,though took a couple of days off to consolidate and then made another move upto 5,500 on Thursday. However, all the good work was partly undone by Friday's trade as the frontline indices capitulated to the selling pressure exerted by bears of the market. Meanwhile India VIX, a gauge for market's short term expectation of volatility, gained 7.13% at 24.18 from its previous close of 22.57 on Thursday (Provisional).
WEEK GONE BY
The Bombay Stock Exchange (BSE) Sensex surged by 482.91 points or 2.72% to 18211.52 during the week ended February 18, 2011 while the S&P CNX Nifty was up by 148.95 points or 2.81% to 5458.95. The BSE Mid-cap index was up by 2.87% to 6661.65 and the Small-cap index zoomed by 4.10% to 8128.91. On the National Stock Exchange (NSE), CNX Nifty Junior dipped 3.00% to 10406.25, CNX IT tumbled 1.91% to 6719.65 and CNX midcap was the worst performer, declining by 3.45% to 7483.9. On the other hand Bank Nifty closed flat, up by 0.13% to 10447.75. In the BSE sectoral space, there was only one loser, Realty down by 2.24% for the week to snap the week at 2052.11. On the other hand, Bankex was the biggest gainer up by 4.87% to 12419.72, followed by Metal up by 4.02% to 15892.31, Capital Goods (CG) up by 3.93% to 13132.51, Consumer Durables (CD) up by 3.40% to 5719.04, Fast Moving Consumer Goods (FMCG) up by 2.94% to 3295.36, Auto up by 2.67% to 8717.71, Public Sector Undertakings (PSU) up by 2.12% to 8522.38, Power up by 2.09% to 2611.98 and TECk up by 1.53% to 3647.97.
Finance Minister Pranab Mukherjee today said the Direct Taxes Code (DTC), which will replace the Income Tax Act, is proposed to be implemented from April 1, 2012.
"... The code is proposed to be effective from April 1, 2012," Mukherjee said in his Budget speech 2011-12.
In the DTC Bill, which was introduced in Parliament last year, the annual I-T exemption limit is proposed at Rs 2 lakh, compared to Rs 1.6 lakh at present.
Under the Bill, the government seeks to widen tax slabs to levy 10% tax on income between Rs 2 lakh and Rs 5 lakh, 20% on Rs 5-10 lakh and 30% above Rs 10 lakh.
Currently, income up to Rs 1.6 lakh per annum is exempt from tax for individuals. For women and senior citizens, the limit is 1.9 lakh and 2.
MUMBAI (Reuters) - The BSE Sensex turned negative on on Tuesday afternoon as investors expected another rate hike in the near term to tame inflation, after the Reserve Bank raised key rates by a quarter point in line with market forecast.
Financials led the decline.
At 1:41 p.m. (0811 GMT), the 30-share BSE index was down 0.18 percent at 19,116.22 points, with 14 components declining. It had risen nearly 1 percent earlier in the day.
The 50-share NSE index was down 0.1 percent at 5,736.95.
Mumbai, Jan 25 (IANS) A benchmark index for an Indian equities market Tuesday slipped from its intra-day highs as stocks first rose after only a 25 basis points hike in interest rates by the Reserve Bank of India, but later slipped sharply on profit booking.
Reserve Bank of India (RBI) Governor Duvvuri Subbarao hiked the repurchase or repo rate to 6.5 percent from 6.25 percent and reverse repo rate to 5.5 percent from 5.25 percent. Other rates like cash reserve ratio and statutory liquidity ratio remained unaltered.
The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened at 19,227.42 points, was ruling at 19,219.67 points - up 69.01 points or 0.36 percent from its previous close at 19,151.28 points.
The Sensex had climbed 189.71 points post-rate hike to 19,340.99 points.
The 50-scrip S&P CNX Nifty of the National Stock Exchange too was in the green, trading 0.37 percent higher at 5,764.65 points.
Broader markets were ruling moderately higher with the BSE midcap index up 0.22 percent and the BSE smallcap index up 0.37 percent.
Banking stocks were among the top losers, having risen in the past few days in anticipation of a greater rate hike, while capital goods and metals scrips rose.
The market breadth was positive, with 1,463 stocks advancing compared to 1,228 scrips on the decline, while 110 stocks remained unchanged.
Among gainers on the Sensex were NTPC, Hindalco Industries, Sterlite Industries and L&T, while the losers included ICICI Bank, Tata Motors, HDFC Bank and M&M.
Other Asian stock markets were trading mixed with concerns persisting that high inflation would lead to central banks in the region tightening rates further.
The Japanese Nikkei closed 1.15 percent up at 10,464.42 points, while Hong Kong's Hang Seng rose 0.39 percent to rule at 23,894.36 points.
However, the Chinese Shanghai Composite index was ruling 0.84 percent lower at 2,673.13 points.
MUMBAI (Reuters) – The Reserve Bank of India (RBI) raised key interest rates on Tuesday by a quarter point each, as expected, in a bid to clamp down on resurgent inflation and warned that higher food prices could become entrenched if steps to boost output are not taken.
The increase in key rates was the seventh since March, and while the 25 basis point rises were expected, a growing number of analysts had said in recent days that a 50 basis point increase was needed.
KEY POINTS:
- Repo rate, the short-term lending rate, up 25 basis points at 6.50 percent.
- Reverse repo rate, the short-term borrowing rate, up 25 basis points at 5.50 percent.
- Cash reserve ratio, the level of deposits that commercial banks must keep with the RBI, unchanged at 6.0 percent.
COMMENTARY: JONATHAN CAVENAGH, SENIOR FX STRATEGIST, INSTITUTIONAL FX SALES, ASIA AT WESTPAC INSTITUTIONAL BANK, SINGAPORE:
"India has a serious inflation problem, something officials have been highlighting recently. I suspect the market would have been looking for a bolder move in terms of a 50 basis points move.
"They need to show the market that they are prepared to get ahead of the curve but a 50 basis points move may have prompted fears of a pullback in growth, so we only got a 25 basis points move."
GAURAV KAPUR, SENIOR ECONOMIST, ROYAL BANK OF SCOTLAND, MUMBAI:
"RBI policy rate hike was along the expected lines. It is an attempt from the central bank to contain the impact of recent spurt in food inflation into more generalized inflationary pressures.
"Considering that demand conditions remain fairly strong, we expect the Indian central bank to raise rates by another 50 bps at least in the first half of 2011 itself.
"The RBI has also hinted at slower growth with rising risks of high food inflation, widening current account deficit and the constraints from high fiscal deficit." SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI, MUMBAI:
"Clearly, the RBI stance indicates that there are more tightening on the way. And our sense is that in the current financial year we will see another 25 basis points hike, and perhaps in the first quarter of FY12 another 25.
"So we are basically talking about by the middle of the year the repo rate will be at 7 percent and the reverse repo rate at 6 percent.
"But our sense is that further monetary monetary tightening beyond that will depend on how the growth pans out and our sense is that there is a possibility that RBI will pause for certain time after repo rate reaches 7 percent."
VIVEK RAJPAL, INTEREST RATE STRATEGIST, NOMURA FINANCIAL ADVISORY & SECURITIES (INDIA), MUMBAI:
"Following today's rate hike we should see some steeping of the OIS curve. Going ahead, the RBI will continue with the gradual tightening process. This is because the effective tightening of monetary situation has been far higher than the actual policy rate hike."
"For instance, even before today's policy release the MIBOR (Mumbai interbank offered rate) fixing was around 6.70 percent, around 45 basis points higher than the repo rate (RBI's key lending rate).
"So expecting a 50 basis point hike was anyway too much and what central banks have learnt in 2007/08 episode is that it is far better not to be aggressive on rate hikes in a commodity price rise driven inflation."
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI:
"Today's move clearly shows that the RBI has relaunched its attack on inflation given the persistence of inflationary pressures.
"I expect them to frontload the rate hikes in the January-March quarter as in the next financial year there will be limited room because of the expected large sized government borrowing programme.
"There are lots of uncertainties on the fiscal front and the foreign institutional investors front but I am expecting another 25 basis points increase in the next mid-quarter review as well."
ASHUTOSH DATAR, ECONOMIST AT BROKERAGE IIFL, MUMBAI:
"We expect a 25 basis points hike in the March policy meeting and a cumulative 100 basis points hike in policy rates in calendar 2011.
"Monetary policy tightening along with sustained high inflation will result in domestic demand momentum moderating a bit in FY12, which will create the much needed slack in the economy for inflation to moderate.
"We expect GDP growth of 7.7 percent in FY12, slower than 8.6 percent in FY11."
AMBAREESH BALIGA, VICE-PRESIDENT OF KARVY STOCK BROKING, MUMBAI:
"The rate hike decision is in line with our expectations. But looking at their revised inflation projections and the RBI report that came in yesterday, we can expect another 25 basis point hike in some time."
JAGANNADHAM THUNUGUNTLA, HEAD OF RESEARCH, SMC GLOBAL SECURITIES, NEW DELHI: "I think 50 basis points hike would have helped better to attack the inflation problem. Inflation has been a concern and it's on top of their mind, but probably they want to raise the rates in two steps."
DEVEN CHOKSEY, MANAGING DIRECTOR AT K R CHOKSEY SHARES & SECURITIES IN MUMBAI:
"The RBI is trying to stem inflationary pressure, but at the same time is being cautious that growth is not impacted. They are following a gradual approach for rate hikes, so that pressure is not felt suddenly.
"The market is relieved, and seems to be taking a positive view of this approach. I am expecting the market to stabilise, not just from this, but also because the dollar remains weak.
"Working capital costs for companies will go up, but I guess they will have to offset this with higher volumes and efficiency."
MEGHNA PATEL, ECONOMIST, STCI PRIMARY DEALER, MUMBAI:
"Actual inflation may be higher than RBI's revised estimate. So a lot depends upon how food prices pan out in the next few weeks. We could still have another 25 basis points hike in March.
"Market should prepare for the issue of a new 10-year benchmark bond around the start of next financial year with a coupon of 8.00-8.25 percent."
MARKET REACTION
- The 30-share BSE index extended rise after the decision to be up 0.9 percent.
- The yield on the most traded 8.13 percent, 2022 bond fell to 8.23 percent from 8.24 percent before the policy decision.
- The benchmark 10-year bond yield fell to 8.16 percent from 8.18 percent.
- The one-year swap eased 2 basis points to 7.40 percent.
- The benchmark five-year swap was down 2 basis points at 8.01 percent.
- The partially convertible rupee trimmed gains to be at 45.53 per dollar, from 45.48 beforehand.
BACKGROUND:
- India's food inflation eased for the second straight week in January, tracking lower fruit and vegetable prices. The food price index rose 15.52 percent and the fuel price index climbed 11.53 percent in the year to Jan. 8.
- The wholesale price index , the most widely watched gauge of prices in India, rose 8.43 percent in December from a year earlier, compared with 7.48 percent in November, showing food inflation had fed into the broader economy.
- India's manufacturing sector expanded at a slower pace in December than in the previous month, weighed down by a weakening growth in factory output and new orders, a survey showed earlier this month.
- Growth in India's service sector also eased in December from a four-month high the previous month, reflecting a slightly slower expansion in new business.
- India's annual industrial output in November grew at 2.7 percent, its slowest in 18 months.
- India's infrastructure sector output grew 2.3 percent in November from a year earlier, slower than an upwardly revised annual growth of 8.6 percent in October.
(Compiled by Swati Bhat, Neha D'Silva, Ami Shah, Sumeet Chatterjee, Prashant Mehra and Aditya Phatak; Editing by Ranjit Gangadharan)
