Stock market and Nifty Outlook and Review for 27th August, 2010

Stock market and Nifty Outlook and Review for 27th August, 2010

Yesterday, on the Daily Charts, NIFTY made a Spinning Top Pattern, which indicates the presence of a lot of uncertainty. Although, bears tried their best to build up the selling pressure, but at the last hour of the trading session, bears won the game and NIFTY ended in a positive territory. For the day, NIFTY opened flat with a positive bias of around 10 to 15 points. Till the second half of the trading session, the session was much muted, only Stock and Sector Specific movement was witnessed. After the opening of the European Markets, NIFTY first made a high of 5486.55 for the day and then again faced a sudden dip and dragged till the levels of 5454.70, along with a good selling pressure all over the counter. As expected, a good bounce was again witnessed in the last hour of trading, due to Short Covering and Rollover in the Futures Positions. Hence, it can be said that a highly volatile session was witnessed due to the F&O Expiry. Finally for the day, NIFTY closed at 5477.90.

A bit of flattish session with a positive bias is expected tomorrow, as the Corporate tax rate has been reduced to 30% from the current rate of 33.6% in the Direct Tax Code Bill approved by the Cabinet, late in the evening yesterday. Government is going to introduce the same Bill in parliament on August 30, 2010.  On the Global front too, a series of important Economic Data are going to be announced in Japan, besides this, Germany and US is going to announce Q2 GDP Numbers, which will be decisive for the next move of the markets. Only Stock and Sector specific momentum will be observed as markets are trading range bound. Traders are suggested to follow very cautious approach by following Strict Stop Losses in Intraday Trading.

Net Selling of Rs. 276.62 Crore in Cash Segment and Net Buying of Rs. 353.05 Crore in F&O Segment by FIIs was witnessed on Thursday’s Trading Session.

5365 is the major Support which has to be breached to prove the weakness, and unless the NIFTY is trading above this level, the Markets are positive. 20-Days EMA (Exponential Moving Average) has crossed the 50-Days SMA (Simple Moving Average), supporting the recent positive move. MACD (Moving Average Directional Index) and RSI (Relative Strength Index) have turned positive. Traders may take delivery basis position in the stocks turning from their oversold territory and make smart gains.

For the day, intraday resistance for NIFTY comes at 5490 / 5520 / 5535 levels. At the same time, 5450 / 5435 / 5420 will act as major intraday support levels.

Contributed By: Sonal Natani MS(Finance), ICFAI, Hyderabad.