Weekly Outlook Indian Stock Market (10 - 14 May)

WEEKLY TECHNICALS
High: 5278.70
Low: 4984.60
Close: 5018.05
Change: -259.95
RSI (14 Days): 49.54
Pivot: 5094
Support: 4910, 4801
Resistance: 5202, 5387

TECHNICAL CUES
Bears remained in charge of the entire week ended May 07, 2010 as lingering apprehension of Greece's debt problems spilling over the rest of the world caused a major sell-off across the globe. Right from the start of the week, indices traded lower on the back of sell off following weakness in the Asian markets after China’s tightened money supply fueled uncertainty about the near term outlook. Persistence anxiety over the Greece debt burden in the European market also dragged the indices back home down. Indian benchmarks continued with its losing streak after news that Moody's Investors Service placed its credit rating for Portugal on a review for a possible downgrade. Indices plunged southwards dragged by selling pressure across board and with no positive triggers to rely on. On the sectoral front, sell-off was witnessed across board led by metal and realty stocks. Nifty wrapped the week at 5,018.05 down by 259.95 points (or 4.93%).

• The Put-Call ratio of open interest increased marginally, finally closing at 0.98 levels. The options concentration has seen at 5,000 - 4,800 strikes put option.
• The Volatility Index (VIX) increased and closed at 27.40%. Market participants should be watchful at current levels as any more up move in volatility index may trigger more downtrend in the markets. Volatility has a strong inverse correlation with markets.
• FIIs were net seller in index futures to the tune of Rs 3,708.24 crore and FII index options witnessed a further rise in OI along with a net buy of Rs 7,276.60 crore along with incline in PCR indicating a bearish trend.

The overall mood continues to be cautious with downward bias as global markets cues are critical, the overall trend indicate negative bias, but any positive trigger may necessitate existing short covering thus enabling sharp upward move. It is expected that Nifty will take next support near 200 DMA at level of 4,960.

OPTION CUES
During the week, most of the open interest builds up in the range of 5,000 to 4,800 Put, while, on the flip side, maximum open interest accretion was seen in 5,100 and 5200 Call. 5,000 and 5,000 strike put added 7.96 lakh 10.06 lakh shares respectively in OI on Friday. On the Call front 5100 and 5,200 strike calls witnessed addition of 3.26 lakh and 9.25 lakh shares.

OVERALL VIEW
Nifty is likely to rebound
Nifty witnessed a sharp selloff this week on the back of weak global cues. It was a disappointing week as Nifty breached many crucial support levels during the entire week. First, it broke the lower level of 5,320-5,200 range i.e., 5,200 and then moved further downward to break the next major support level of 5,100. It finally got support at 5,000 levels which restricted its further downward move and ended the week above this crucial mark. As far as the momentum indicators are concerned, they are still giving bearish indications. Also, as Nifty is trading very close to its 200 day simple moving average, there is a possibility of Nifty moving further lower to test its 200 SMA which is positioned at 4,950-4,960 levels. It can move downward until its 200 SMA during the initial sessions, only if it breaches the 5,000 level and expected to rebound from there else, it might rebound from the current levels if it gets the support of its global counterparts. If Nifty breaches 4,950 level on the downside, it can test 4,850 level whereas on the upside it can test 5,200 level after breaching the strong resistance at 5,100 level.

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