Chart check: Will Nifty face resistance around 8400?

Riken Mehta

Follow me on Twitter @mehtariken

The benchmark index Nifty is hitting fresh all-time highs cheering lower commodity prices and expectation of policy rate cut boosting the credit growth cycle in the coming quarters. Rising dollar index is a worrisome sign but excessive liquidity thanks to Bank of Japan’s massive bond buying program is pushing equities higher across the globe. FIIs have pumped in close to 2 billion dollars in the last 20 days keeping rupee in the range of 60-62 against the greenback

As seen from the chart, the Nifty has been moving in a channel since the historic election outcome in May. The Nifty gave false breakouts since then one on the upside in September followed by other on the downside last month. Currently, the Nifty has again broken on the upside moving out of the channel. However, only time will tell whether it is a false breakout and the Nifty will move back in the channel or it has more room to move higher.

December 14, 2014

The Nifty did breakout and manage to stay above 8400 for few days and touch a record high of 8626. However, selling pressure emerged at higher levels and the Nifty moved back inside the trading band only to prove to be another false breakout.

Rising dollex spells bad news for Nifty

 

Riken Mehta


Follow me on Twitter @mehtariken

The US dollar index is trading at four-year high surpassing 85 levels on the upside on Thursday. The dollar index tracks greenback movement against six other major currencies. The current rally in dollar index is sparked by faster US economic growth pushing the US Federal Reserve closer to raise interest rates while the slowdown in Europe and Japan has forced central bankers to increase stimulus and boost liquidity.

As seen from the chart, the Nifty has negative correlation with the dollar index. Indian equity market banks heavily on foreign fund inflows and strength in US dollar index would accentuate selling in equities by FIIs.

The Indian rupee closed at 7-week low in trade on Thursday. FIIs have sold shares worth close to Rs 3000 crore in last three days. It would be premature to say that a deeper correction is underway but one should keep a close look at dollar index before starting bottom-fishing in the market.

Chart of the day: Brent crude Vs Nifty in past 3 years

Riken Mehta
Moneycontrol.com

Follow me on Twitter @mehtariken

The price of Brent crude fell below the USD 100 a barrel mark for the first time since June 2013 on Monday as data from China and the US pointed to slower economic growth in the world’s largest oil consumers.

Investors have driven global prices down 15 percent from mid-June highs as fears about a supply disruption in Iraq or elsewhere faded and concerns about weak global demand grew. This has given more legs to the extended bull run in Indian equities.

While crude prices came off, foreign institutional investors pumped in a net of Rs 1,162 crore into Indian equities, which is expected to help the Central government and the Reserve Bank of India to rein in fiscal deficit and inflation.

BSE Sensex at new highs: What are market internals suggesting?

Riken Mehta
moneycontrol.com

Follow me on Twitter @mehtariken

Indian stocks are trading at all-time high levels in anticipation of GDP growth picking up and that corporate earnings may have bottomed out. Can this rally sustain? Let us look at key indicators if there is still steam left.

Breadth of the market

The breadth of the market is one of the indicators used to gauge the strength of the rally. Advance Decline ratio measures the number of stocks advancing to the number of stocks declining in the market. As seen from the chart the advance-decline ratio is rising with the rally in Sensex which is a good sign. Traders should look for any divergence in the pattern with respect to Sensex movement in future which may suggest that the market is likely to  peak out.

Chart: Sensex (Left Axis), Advance Decline Ratio (ADR)  (Right Axis)



























New High Low Index

New High Low Index takes into account the number of stocks touching new yearly highs and lows on a trading day. The rising index along with the uptrend in Sensex suggests a powerful rally. The index is moving higher as Sensex scales new high signaling more stocks are hitting new 52-week highs with a broader participation of stocks in the market.



New High Low Index =         Number of stocks touching new highs                                                                                                                (Number of stocks touching new highs + new lows) 
 

 Chart: Sensex (Left Axis), New High Low Index  (Right Axis)

Sentiment Index

Sentiment suggests the mood of the traders and investors in the market. There are two groups of people in the market- Informed and uninformed investors (retail investors).  Informed investors invest when market is trading at lower levels, sentiment is pessimistic and uniformed investors are bearish on the market and opt to invest in fixed deposits. When retail investors invest heavily in the market putting all the money in stocks and expect the market to touch new highs every day is a signal that market is likely to peak out. Unfortunately, no public data is available to measure Sentiment index but the general mood is retail investors are currently still cautious and not invested heavily in the market so far. Another good sign!

F&O Check: Option buyers book out; IVs halve, premium falls

Riken Mehta 
moneycontrol.com 

Follow me on Twitter @mehtariken

F&O players had geared themselves for volatility on the day of the election results and took heavy positions in the options market mostly on the long side. A trader or investor bullish on a particular index or stock would buy at the money or out of the money calls to cash in on upside in it.

Traders bought Nifty out of the money calls earlier this week especially 7200, 7500, 7700 and 8000 calls in anticipation of 5 to 10 percent rally today. The Implied Volatility or IV shot up to as high as 40 levels yesterday on huge positions in calls.

Nifty rallied to 7500, gain of 400 points on early trends predicting BJP win and the premiums in most of the calls doubled leading to profit booking in out of the money calls. The Nifty is now down 300 points from day’s high and IVS have fallen to sub 25 levels.

Recap 2013: How equities, commodities, currencies performed

Riken Mehta

Follow me on Twitter @mehtariken 

After nearly a six-year wait, Indian equity benchmarks, the BSE 30-share Sensex and the NSE 50-share Nifty broke their record highs this year.  But that’s not it; 2013 saw a number of fresh multi-year record lows/highs both on the macro and investment front.

Despite FIIs investing USD 20 billion in 2013, the index returns for FIIs in dollar terms is negative at 3.91 percent primarily due to rupee depreciation. The year 2013 has been more stock and sector specific with IT, pharma and FMCG leading the list of winners.

Let’s take a look at how various asset classes fared in the year 2013.

Developed markets versus Emerging markets

As seen from the table, benchmark indices of US, UK and Japan have given handsome double digit returns so far this year. The momentum in these markets may continue as major indices of US (barring Nasdaq) and UK (barring CAC) are trading at life-high. Nikkei is trading close to its 6 year high. Emerging markets have posted negative or single digit positive returns this year, underperforming developed markets.














Commodities

Gold has posted its biggest annual loss since 1981 as investors shifted their money from safe haven asset class to risky asset class like equities on the back of strong economic growth in developed countries. Brent Crude remained in a narrow band of USD 95-115 per barrel.



















Currencies

The domestic currencies of the emerging markets depreciated substantially this year on fears of tapering by the US Federal Reserve. The rupee depreciated to a record low of 69 levels making it one of the worst performing Asian currencies this year. Japanese yen on the other hand weakened to a five-year low on the back of loose monetary policy to spur growth in the economy.











Indian Indices

Live Market Commentary: Nifty stuck at 6300; TCS, DLF, SBI, Infy top gainers

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3:45 pm Market closing: The market saw a strong performance with support by banks and IT stocks. The Sensex was up 118.99 points at 21193.58, and the Nifty ended at  6313.80 up 34.90 points. About 1374 shares have advanced, 1166 shares declined, and 147 shares are unchanged. BSE IT index jumped 2 percent with Infosys, TCS and Wipro as major gainers. However, oil & gas and auto stocks were under selling pressure. Maruti, Reliance, BHEL and Bajaj Auto were laggards.

3:30 pm Buzzing: Infosys hits record high at Rs 3570, up 1.5 percent intraday on the BSE. However, on the NSE it was just below a record high of 3,573.00 hit on December 20.

3:20 pm Update: Questioning the timing of the steep hike in CNG prices, Arvind Kejriwal today said he will examine whether the increase can be rolled back after taking charge as Delhi's Chief Minister, reports PTI.

"What was the need to increase CNG prices when a new government is to take over in Delhi. It raises suspicions about their intention. I will look at the files once I take over tomorrow and see if the hike can be rolled back," Kejriwal said here.

The AAP leader will be sworn in as Delhi Chief Minister tomorrow.

3:10 pm Market check: The Sensex is up 117.34 points at 21191.93, and the Nifty is up 34.00 points at 6312.90. About 1321 shares have advanced, 1109 shares declined, and 137 shares are unchanged.
TCS is up 3 percent, while other gainers in the Sensex are Cipla, Infosys, Wipro and HDFC. Among the losers are Reliance, BHEL, Maruti Suzuki, Bajaj Auto and Hero MotoCorp.

3.00pm: Stocks at 20% upper circuit: Smallcap stocks like DS Kulkarni, C Mahendra Exports, Taneja Aero, Modern Dairies and Cybertech Systems were locked at 20 percent upper circuit.

2:58pm Most active: The most active shares on BSE were Tata Elxsi, Aban Offshore, Infosys, MCX India and SBI.

2:54pm Rupee at day's high: Indian rupee was trading at day's high around 61.90 mark depreciating 0.42 percent compared to its previous close.

2:52pm Nifty at 6800-7000: Earlier today in an interview with CNBC-TV18, Vibhav Kapoor of IL&FS said he is more positive on the stock market now than he was two months back. His 12-month Nifty target is 6,800-7,000 and sees 5750-5800 as the base for the index. Read full interview here

2:47pm Buzzing Stock: Shares of Hindustan Motors rallied 5 percent intraday on Friday as it gears up for restructuring. The company has been suffering from poor cash flow due to lack of vehicle sales. Read more

2:41pm: F&O buzzers: Hexaware, Apollo Tyres, Divi's Labs, Bank of India and TCS are top gainers in the F&O space. On the losing side, Aurobindo Pharma, Jindal Steel, Arvind and Ashok Leyland were trading in red.

Tepid volumes: Lack of participation from fund managers on account of year-end holidays have led to tepid volumes today. A turnover of Rs 62000 crore has been recorded so far which is far less compared to average volumes.

2:35pm: Price Shockers: Stocks like Rico Auto, Welspun Corp, Liberty Shoes, Vaibhav Global and McDowell Holidings have gained more than 50 percent in last 15 trading sessions.

2:30pm: 2013 Celebrity 100 list: In Forbes 2013 Celebrity 100 list, check out which cricketers and celebrities have made debuts this year. Read full story here

2:21pm: Commodity Check: MCX Feb Gold contract was trading at Rs 28429, down Rs 147 or 0.51%. The yellow metal has lost nearly 20 percent from its all-time high of close to Rs 35000 in August.
MCX March Silver contract was trading flat at Rs 44790. MCX Jan Crude oil contract was trading at Rs 6188, down 11 rupees.

The BSE Sensex was trading strong on the final day of the last trading week of 2013. IT heavyweights like Infosys and TCS were star performers of the day. Midcap IT and banking stocks were also minting money for traders.

The Sensex was up 119 points or 0.6% at 21194 and the Nifty was up 33 points or 0.5% at 6312.
The advance decline ratio still remains strong with 1284 shares advancing compared to 1041 shares declining.

TCS was top gainer in the Nifty with close to 3 percent gains followed by Kotak Mahindra Bank (up 2%), NMDC (up 1.9%), Cipla (up 1.75%) and HUL (up 1.27%).

BHEL, Jaiprakash Associates and Maruti Suzuki were top losers in the Nifty losing over a percent each.
In broader markets, stocks like  Apollo Hospitals (up 6%), TVS Motor (up 5.14%), Bajaj Electricals (up 4.97%), Chennai Petro (up 4.37%) and KPIT Tech (up 4.30%) were buzzing on heavy volumes.

Nifty's 50 DMA holds the key for this rally to sustain

Riken Mehta

Follow me on Twitter @mehtariken 

The 50 Day Moving Average of Nifty holds the key for this rally to sustain in the near term. As it is evident from the chart the Nifty took support around its 50 DMA on three occasions in last two months and bounced back sharply. As the name implies, it is an average of a certain body of data. For example, if 50 day moving average (DMA) of closing prices is desired, the closing price for the last 50 trading days are added up and the total is divided by 50. The term moving is used because only the last 50 days closing prices are used for calculations.

The 50 DMA acts as a support in an uptrend and resistance in a downtrend. When the Nifty breaches 50 DMA on the upside in an ongoing trend with heavy volumes, then one can infer there is a reversal in trend and vice-versa. However, one must wait for the Nifty to close above or below 50 DMA for 3 to 5 trading sessions on a consistent basis before concluding trend reversal.

The moving average is a smoothing device. By averaging the price data a smoother line is produced making it much easier to view the underlying trend. Remember, moving average is a lagging indicator. What it means is that 20 Day Moving Average would hug the price action more closely than 200 Day Moving Average.

Depending on your time frame, a shorter, medium or longer term average can be used. A 50 day moving average would be more useful for short term trend while 200 DMA will prove effective for the longer term.

Types of Moving Average

Simple Moving Average

Simple Moving Average is widely used by most of the technical analysts. However, over the years this moving average has been criticized for assigning equal weight ages to all days. In a 20 day average, the last day receives the same weight age as the first day. This was taken care by Exponential Moving Average

Exponential Moving Average

Exponential Moving Average assigns a greater weight to the more recent data which is why it is called a weighted moving average. We will not brief the calculation. Technical software’s and charts makes it easy for you. All you have to do is select the number of days you want in the moving average: 20, 90, 200 etc.

Chart: Nifty’s intra-year pullbacks over last 13 years

 

Riken Mehta

Follow me on Twitter @mehtariken  

The Nifty's 23 percent rebound from the lows of August (and also the lowest point for the year) has taken investors by surprise. But this recovery is still not as strong as some of the comebacks seen over the last few years. The biggest bouncebacks were in 2003 and 2009, when the index more than doubled from the lows of the year.

Intra-year recovery is recovery from lows of the year to year end price

Chart: Nifty’s intra-year pullbacks over last 13 years

Read more at: http://www.moneycontrol.com/news/market-edge/chart-nifty%E2%80%99s-intra-year-pullbacks-over-last-13-years_1007134.html?utm_source=ref_article






<a href="http://www.hypersmash.com">www.hypersmash.com</a>

Long developed market indices (US, UK, Japan), short gold is trade of 2013 so far

Riken Mehta

Follow me on Twitter @mehtariken 

Loose monetary policies by the central governments of major developed markets have made a substantial impact on various asset classes (equities, debts, commodities and currencies) around the globe this year. The major bond buying programs were aimed to kick start the struggling economy but made its way into risky assets like equities. The successful trade of 2013 so far is “long developed market equities, short bullion.”

As seen from the table, benchmark indices of US, UK and Japan have given handsome double digit returns so far this year. The momentum in these markets may continue as major indices of US (barring Nasdaq) and UK (barring CAC) are trading at life-high. Nikkei is trading close to its 5 ½ year high. Emerging markets have posted negative or single digit positive returns this year, underperforming developed markets.

Gold which was considered to be safe haven has lost its sheen (down 26%). Investors have dumped gold as US economy rebounds and the yellow metal is now trading merely 5 percent above its three-year low price touched earlier this year. Silver - more volatile than gold has lost 35% so far this year.

Developed Markets	US			UK			Japan
Indices	Dow Jones	NASDAQ	S&P 500	DAX	CAC	FTSE	Nikkei
YTD Returns%	22.59%	32.20%	26.54%	18.52%	14.59%	10.73%	43.91%

Emerging Markets	Brazil	Russia	India	China	Indonesia
Indices	Bovespa	RTS	Nifty	Shanghai	Jakarta
YTD Returns%	-13.37%	-5.37%	1.53%	-3.21%	0.03%

Bullion	Gold	Silver
YTD Returns%	-26.17%	-35.11%

Why it is critical for Nifty to close above 6300 on consistent basis

Riken Mehta 

Follow me on Twitter @mehtariken 

Nifty has crossed 6300 twelve times intra-day in last six years (Four times each in 2008, 2010 and 2013) but managed to close above 6300 only on four occasions.

Below is the table of number days Nifty closed in that range in a particular year

Year	2008	2009	2010	2011	2012	2013	Total
Above 6300	0	0	2	0	0	2	4 days
6000-6300	11	0	40	4	0	62	117 days
5000-6000	48	42	179	193	215	154	831 days
4000-5000	119	114	31	50	36	0	350 days
3000-4000	30	35	0	0	0	0	65 days
2000-3000	38	52	0	0	0	0	90 days
Year range	2524-6288	2573-5201	4718-6312	4544-6157	4637-5930	5285-6317

In 2008 (Nifty made an all-time high but failed to close above 6300)

Nifty touched an all-time high of 6357 on 8-Jan-2008 but closed below 6300 on the very same day. Nifty also touched a low of 2252 in the same year and closed at 2524. Year range (close price): 2524-6288

In 2010 (Nifty made double top around 6300)

Nifty closed above 6300 on couple of days but failed to record a new all-time high and retraced back from 6300 levels to 5752. Nifty also closed in the range of 6000-6300 for 40 days unlike in 2008 (only 11 days). Year range: 4719-6312

In 2013 (Triple top??)

Nifty again closed above 6300 on couple of days but failed to record a new all-time high and is now below 6000. However, the key positive in 2013 (unlike in 2008 and 2010) is that Nifty has closed in 6000-6300 range for 62 days in 2013 which is more than cumulative days of 2008-2012 (55 days) for the same range. Also Nifty has made a good base in the 5000-6000 range. So, it mayl be too early to say that Nifty has made a triple top but for the Nifty to record a new all-time high and rally beyond it, it will need to close consistently above 6300. Year range: 5285-6317