Indian Markets will continue to witness capital outflows - ZENMoney

Domestic Markets closed the week with losses on account of rupee depreciation and FII outflows. For the week, Sensex and Nifty lost -0.42% and -0.66% points to end at 18519 and 5472 respectively.

Domestic indices opened the week with a gap down following worries over continuous fall in the Rupee, higher inflation and heavy FIIs outflows. Steep rupee depreciation despite policy makers efforts had dampened the investors' sentiment. Markets traded cautiously till the mid week awaiting minutes of the US Federal meeting to get more clarity on the stimulus withdrawal timeline. With Fed signaling a reversal of its massive stimulus program as early as next month the rupee registered a new life time low at Rs. 65.50 against dollar thereby denting the market sentiment further. As a result the market fell to a new 11 month low during the week.

Thereafter, marginal recovery in the rupee due to RBI's intervention in the foreign exchange market to stem the rupee slide has supported the recovery in the markets.

FIIs remained as net sellers for the week in view of the low policy reforms and weak rupee. During the last four sessions, they net sold equities worth Rs 3269 Cr. Mutual Funds too remained net sellers, they net sold equities worth Rs 1684 Cr.

On a Sectoral basis, Metal sector ended the week as a top gainer on the back of strong China's manufacturing index data. IT and Oil & Gas sectors were the other gainers for the week. Health Care, Auto and Realty sectors witnessed profit booking during the week.

As on Friday, the advance to decline ratio stood at 7:5 indicating buying interest witnessed in the market.

For the 5th consecutive week the market has ended with losses. After the steep fall in the last few weeks, the market is witnessing support at lower levels. Though it might correct upto the 5000 levels in the medium term, in the short term it is witnessing a recovery, the market is expected to face resistance at the 5570-5650 range in the current recovery.

The week ahead will see high volatility in the Indian markets as domestic issues dominate the market movement. Especially the developments with regard to the Rupee and the passage of crucial legislative bills in the parliament.

With the rupee breaching new lows, the market will be wary of new measures by the RBI and the government. A decisive move by the rupee either way would impact the market movement. Further, fears of a sovereign downgrade amid weak macros and external imbalances will further pressure the market sentiment.

Indian markets will continue to witness capital outflows on increasing certainty of the Fed tapering its stimulus measures. Weak macros and uncertain political situation in view of the impeding elections is aiding the flight of money from the Indian markets.

The F&O expiry on the 29th of August will add to the volatility in the market this week.

While 5419, 5343 and 5254 are important support levels for the Nifty, 5522, 5570 and 5649 are important resistance levels for the Nifty. The 18306, 18139 and 17760 are the immediate support levels for the Sensex, 18766, 18926 and 19132 are the immediate resistance levels for the Sensex.

Market to face resistance at 5570-5649 range in the short term.

Source : Equity Bulls

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