MOSt Technical Outlook- Monthly

Transcription

1 INDEX S&P CNX Nifty : 5,720 Sensex : 18,918 NIFTY LEVELS Support : 5550, 5485 Resistance : 5850, 5930 RISING CORRELATION ERODES DIVERSIFICATION Nifty for the month of February closed with a loss of 342 points. February was the first monthly candle since 7 months, where it broke the trend of higher tops and higher bottoms. This is a very significant development which implies trend reversal. The first anticipated target on the downside of 5650 is almost achieved and the Nifty could slide towards 5550 / Any pullback on Nifty is expected to witness supply pressure around In dollar terms, Nifty has failed to sustain above its swing high of $115 and this sets up expectation of negative fund flows from FII investors. Seasonality effect on Nifty indicates that, momentum can accelerate in late March which can continue throughout April. Point and figure chart indicates a pivotal breakdown below 5600 for Nifty. The Inter-market indicators point toward negative sentiments with falling commodity prices (positive correlation with Nifty), depreciating rupee and gradually rising India & Global VIX (negative correlation with Nifty). Dollar index has surpassed its immediate resistance of 81 and this development can lead to selling pressure in other world currencies. This can lead to panic liquidation in emerging equity markets in anticipation of falling currency. Historically, a rising global VIX increases the correlation between developing and developed equity markets and therefore, the diversification benefit for global fund managers is expected to erode. Sector rotation chart indicates IT as an outperformer and all other sectors could remain a laggard. Banks, Media, Realty & FMCG could continue to underperform. Sector Outlook SECTOR CMP MOM OUTLOOK POTENTIAL NAME (RS) (%) FOR THE MONTH MOVERS & SHAKERS Shubham Agarwal, CMT, CFA Sr. Technical Analyst IT Positive Tech Mahindra Energy Positive ONGC Infra Neutral LT Auto Neutral Hero Motocorp Pharma Neutral Ranbaxy Realty Negative DLF Metal Negative Tata Steel Media Negative Dish TV Banking Negative PNB FMCG Negative HUL

2 S&P CNX INDEX NIFTY SUPPORT LINE NIFTY IN $ Nifty witnessed a breakdown from a medium term trend line at This breakdown was confirmed when the Nifty re-tested the trend line and again headed towards the south. The downside is expected to continue until a reversal pattern becomes visible. Nifty in dollar terms failed to sustain above the earlier swing high of $115 and has confirmed a breakdown. The chart indicates that further profit booking can be expected from the foreign investors. NIFTY POINT AND FIGURE NIFTY SEASONALITY Point and Figure chart of Nifty indicates support at 5600 below which, 5400 will be important. A breach below 5600 will lead to next leg of sustainable downside. Seasonality effect on Nifty indicates that late March has been a phase of acceleration in trend. There is a fair chance for this pattern to duplicate in the coming month.

3 INTER-MARKET GSCI - GLOBAL COMMODITY INDEX USDINR GSCI Commodity index did not manage a breakout from the long term resistance of the trend line. Short term trend suggests a reversal and the index could be headed lower. Positive correlation with Nifty also seems to be rising. INDIA VIX USDINR is headed higher but is yet to confirm a breakout from the important resistance of 56. Sustenance above 56 can lead to sustainable depreciation of rupee against dollar. GLOBAL EQUITY ROTATION India VIX is forming a rounding bottom which indicates that the VIX is expected to breakout in near term. Temporary resistance exists at above which sentiments can turn negative for Nifty. Global equity relative strength chart indicates that Nifty has turned to be an underperformer and the momentum has increased. FII s outflow is therefore expected to accentuate. CORRELATION NIFTY USD GSCI GOLD CRUDE BOND MSCI MSCI ASIA MATRIX INR INDEX YIELD WORLD EX. JAPAN Nifty USDINR GSCI Index Gold Crude Bond Yield Msci World Msci Asia ex. Japan

4 RELATIVE PERFORMANCE OF SECTORS TO NIFTY IT METAL CNX IT has confirmed a breakout from a channel on the relative strength chart and the index is expected to continue with its outperformance. MEDIA CNX METAL saw a temporary pullback but eventually saw a breakdown of its long term support. The underperformance is expected to continue with increased momentum. REALTY CNX MEDIA has seen a strong relative performance in recent past but the sector rotation chart indicates falling momentum. The index is expected to underperform over the coming months. CNX REALTY is oscillating in a channel and due to failure of relative strength at the upper band; mean-reversion is expected within the band. Realty stocks are expected to underperform.

5 SECTOR ROTATION REVERSING UP TRENDING UP TRENDING DOWN REVERSING DOWN 3 IT has been leading the rally 3 Energy is improving (indicates expected outperformance) 3 FMCG, Media, Realty, Banks & Services are placed in the weakening space (indicates expected underperformance) 3 Infra & Metal are indicating a declining trend Analyzing Rotation Rotation chart is created by calculating the relative strength of sectors in comparison with Nifty as a base. A ranking is calculated for all sectors and is accordingly placed on the chart. In a trending market, the rotation is expected to be clock- wise but oscillating market can have scenarios of vague movements. Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSL) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold the MOSL or any of its affiliates or employees responsible for any such misuse and further agree to hold the MOSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is from publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, MOSL and/or its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSL and/or its affiliates from doing so. MOSL or any of its affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSL or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations. Either MOSL and/or its affiliates and/or employees may have interests/ positions financial or otherwise, make market, act as principal or engage in transactions of securities of companies as referred to in this report. MOSL may from time to time solicit or perform investment banking or other services for any company mentioned in this document.