Weekly Outlook Indian Stock Market (6 Sep - 10 Sep)

WEEKLY TECHNICALS
High: 5513.95
Low: 5348.90
Close: 5479.40
Change: +70.70
RSI (14 Days): 60.69
Bollinger (20, 2): 4948-5611
Pivot: 5447
Support: 5381, 5282
Resistance: 5546, 5612

NIFTY CUES
Nifty ended the week on a positive note at 5479.40 mark gaining 1.31%. The Nifty September futures ended at 5484.90. If we look at the derivatives data we can see that Nifty future prices ended in the positive territory along with rise in the cost of carry and addition of open interest, this is an indication of long built up at lower levels. For the coming week Nifty may continue to face resistance at higher levels of 5550-5580 whereas on the downside support is seen at 5440-5380 levels.

• The PCR-OI declined slightly from 1.22 to 1.16 on account of heavy short accumulation in Nifty September 5200 to 5400 Strike Put.
• The Volatility Index (VIX) remained at lower level and closed at 15.86% down from previous week. Market participants should be watchful at current levels as any up move in volatility may trigger downsides in the markets.
• FIIs were net buyer in index futures to the tune of Rs 1,103 crore while in stock future they were net buyer of 466 crore, indicating further long accumulation in markets. Further, in the index options FII were net buyer of 6,609 crore.

Overall next week, Nifty is expected to show a positive trend and light selloff is likely at every resistance level. Nifty is likely to trade in a range of 5400-5580. Instability on the global front is likely to result in selling pressure from current levels. The trading strategy would be to go long if the Nifty sustains above 5480 levels for targets of 5550 on the other hand, one can also initiate shorts if the Nifty gets resisted at 5580 levels with a target of 5410. Further in option front trader can short 5600 strikes Call and 5400 strike Put of Nifty for September expiry.

BANK NIFTY CUES

During the week the Bank Nifty Index ended on a positive note and rose by 2.46% to 10,991.20. If we look at the derivatives desk we can see that the Bank Nifty futures prices increased along with incline in open interest but with decline in the cost of carry, this is an indication closure of long position. For the coming week bank Nifty support is seen in the range of 10750-10800 levels whereas on the upside stiff resistance would be faced at 11100-11150 levels.

OPTION CUES
During the week, there was significant accumulation of open interest in OTM Call and Put options. Most of the open interest accretion witnessed in the range of 5200 to 5400 put, while on the flip side, highest open interest was build up in the range of 5500 to 5700 Calls.

GOLD
Gold prices started the week on a modestly higher note. Prices rose as government reported a disappointing savings rate figure for US households. The yellow metal continued with the upsurge throughout the week, a weaker dollar and safe-haven buying were the noted catalysts. The encouraging economic data towards the end had little impact on the gold prices, as the precious metals traders anxiously awaited Friday’s U.S. employment report. The domestic gold prices followed the international trend. Apart from the weak economic data, the domestic gold prices rose because of the weakening rupee. Along with other factors, the domestic gold consumption also remained strong amidst the ongoing festivities and wedding season. Finally, the domestic and the international gold prices registered a growth of almost 1% on w-o-w basis, in both the international as well as the domestic market. The gold prices are expected to advance in the coming week. The precious metal may register gains on speculation the global economic slowdown will spur demand for safe haven assets. The domestic demand will also stay strong, following the international trends and amidst the upcoming festivals and wedding season.

OVERALL VIEW

On daily chart Nifty exhibiting “ascending triangle” which is bullish breakout pattern if upper trend line breaks, price is near to upper trend and expecting it to move within triangle till the time it does not break upper or lower trend line. On upside Nifty resistance level is 5550 while on downside it has mild support at 5440. On upside if level of 5550 breaks then we could see rise in it up to mark of 5580, on the other side if level of 5440 is breached decisively then it could retrace up to 5347. The Index has been facing resistance at 5500 level. Nifty was trading in a narrow range of 5400-5510 on last week. It has consistently been trying to get above 5500 mark. Even European markets and US index futures were flat in trade. After making to a new week low of 5348.90 on Tuesday (31st August, 2010) Nifty rose continuously and touched weekly high of 5513.95 on Thursday, before closing at 5476.75 with a gain of 1.25% on w-o-w basis. Nifty had a 200-300 points band earlier which has now become almost 150 points; 5350-5400 on the downside and 5550-5600 on the upside. The market does not seem to be in a mood to be going anywhere as of now.
From last week Nifty is trading in narrow range and moving in between 90-100 points. Nifty is currently trading above weekly 5EMA indicating upward movement. If Nifty continues to trade above weekly 5 EMA, then we could see upside up to 5550 during the coming week. Technical momentum indicator Stochastic is currently moving in overbought zone, and expecting to rise further. RSI is trading in neutral territory at 55 showing positive crossover.

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