Technical Analysis of Indian Equities by Nooresh

Wait and Watch …. Sensex 9300/8900 on downside 10200/10500 on upside.

Sensex Technical View :
Sensex takes a quick dip after hitting 10900 and is quickly down to 9700 losing more then 1000 points . The nearest support zone remains around the 9300-9350 zone . Also 61 % of the current bounce comes to 8900.
At the same time the lowest gap is placed at 8740 -8900. This should be a major support which needs to be watched for a trend change.
On the upside 10200-10500 should be a stiff resistance. Sensex is currently in between the range and that is precisely the reason why it was mentioned yesterday to just wait and watch only.
In the day high volatility was seen with traders getting many opportunities whereas it may also be termed that traders were hit on either side. Such kind of volatility will remain in days to come as indices are in an indecisive mode.

DOW Jones Technical View :

Dow Jones has also corrected from the resistance zone of 9600-9800 and should now test the retracements around 50/61.8% around 8550 /8750 levels. So Technically one needs to observe that zone in coming days for any signs of base formation again.

Stocks to watchout for :

Reliance tried to give a bounce from 1170 zone and will continue to see some support around the 1150 zone. Kotak took a u -turn from 445 and might have given a small trading chance.

Will wait for further stock picks as for the index we are in a no-trade or watch zone. Fresh trades any may be generated in the day only.

Market Observations and Thoughts :
Few months back there was whole lot of discussion going around CRUDE , inflation , forex derivatives, money market liquidity in india and subprime , housing bubble , inflation , CDOs, bank failures etc around the world .
Suddenly many of the above things have been accepted in cases whereas others have ceased to exist. The consensus is many economies around the world may get into a recession or slowdown.

I am bad at economics so just read what receession means as per wikipedia.

a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales."A sustained recession may become a depression .
a rule of thumb that recessions are often indicated by two consecutive quarters of negative growth (or contraction) of gross domestic product (GDP).

A pure read of that tells me for India with a GDP of worst case 6.5-7.5 % it would still be faraway from a technical recession.
There are many things which can be discussed on this topic but will start of with inflation nos which i do have a brief statistical logic on. Although the nos may not be a direct reflection of the actual inflation but continues to be a decider for economic policies.

Some points which may turn it around
1) The major rise in inflation to double digits came in after crude price rise. Indian fuel pricing is around 67 $ and a rate hike may come only again if it comes to above 100 or rate cut if it goes to 50 maybe a rough estimate. My rough guess is crude may not touch 100 + so no cut.
Now what could happen as inflation is rate of change by next year around the price hike dates the impact of rise in inflation may come down or say base effect reduction.
BASE effect first disucussed some time back read it ---

2) There was an acute price rise in commodity and food prices which led to a quick rise in inflation . Such a steep rate of rise may not be emulated next year in current scenario so there could be another impact of stability from this side.

3) There is a belief that the liquidity is not a major concern in Indian banking system but its the confidence and sentiments which is not allowing a flow in the system even after adequate measures. Its a difficult thing to judge but when things become clear in the next 6 months it can lead to a possible surge in corporate lending in a low interest regime also. At the same time it could give strength to inflation as there could be lot of liquidity chasing things but can it be so quick again to bring up a rise in inflation seems difficult.

Al in all as from my previous projections which went right on the economic timing of Sept/Oct to see the peak of weak economic data but was not able to gauge the nos on the index front correctly. So the next 3-4 months around Nov- Jan would see some weakness in data every now and then but may not be major as Oct ideally. As before the view remains of economic though process may change around Jan-Mar and start looking up around March- May 09. Lets c how it pans out this is just a projection personally which may not be adequately researched or accurate.

Would appreciate more comments on the above thoughts ! ...

Best Regards,



Article by Nooresh Merani

Nooresh has written 2801 articles.

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