Another day of volatile and flat trade on Nifty - Alex Mathews

Another day of volatile and flat trade on Nifty backed by lower volumes. Is this indicating at a placidness ahead of a major upside or downside? We have to wait and watch but the markets are consolidating at this point in time. It opened on a positive note in the morning and came down very soon and made many ups and downs during the day but majority of the moves were in the green. But the f&o picture is showing more addition to the bear groups. 5300 and 5200 Nifty puts have seen fresh buying indicating that the undercurrent is still weak. But the Nifty PC ratio has shown an upward movement indicating lower level support also. The market breadth, indicating the health of the market, was weak. On BSE, 1,862 shares declined while 944 shares advanced. A total of 114 shares remained unchanged. The breadth was positive at the onset of the trading session.

The main reason for today's reversal and lack luster movement were the kind of FII selling that we saw in the past few sessions and the reports from the MET department revising downwards the forecast for the vital monsoon rains this year from 98% to 95% below the normal monsoon. Investors expect lower monsoon, which is against the expectation, will lead to rise in food price and increase in input cost for FMCG companies. FII pulling out money is good on one side and bad on the other side. Good in terms of the fact that a pull back in a trending market will be backed by FIIs as they are liquid and bad due to their attraction towards new investment avenue, Japan.

Nifty today moved once again above 5300 in the morning but couldn't stay above that level and closed near to the previous close. Even though we may see some pull back, the under current is indicating a level of 5171 for Nifty which is the right hand shoulder of the head and shoulder pattern formed in the weekly charts. A movement below this level will attract drastic selling. Investors should use this opportunity to invest in stocks in a declining manner as many stocks are trading at attractive valuations and as one cannot pin point the bottom and the time, follow a pyramid method of investing.

On the sectoral front, consumer durable, realty, FMCG and technology stocks were the major laggards. FMCG stocks fell after MET department revised the monsoon rain expectation indicating at high input price and declining demand. Sugar stocks gained during the day ahead of the meeting of EGoM on food scheduled on 23 June 2011 to decide upon whether to allow more sugar export. Metal stocks fell tracking metal prices which fell on concerns of global economic recovery. IT stocks gained except TCS tracking overnight gains made in US.

Asian markets were trading with gains tracking overnight US markets which had rallied for the second straight day. Main reason for the recovery in US was renewed optimism after Greece government won the vote of confidence which was crucial for avoiding a sovereign default. In US, markets gained also on the back of the US existing home sales which rose to 4.81 million against an estimated 4.78 million. European markets drifted lower today as IMF had said that Spain must step up efforts to reform its economy as European debt crisis threatens to affect growth which has started ringing bells. The French business survey rose towards 109 against 106 previously and this gain was negated by European Industrial new orders fell to 0.7% against an estimated 1%. Later in the day we are expecting US FOMC statement, crude and gas inventory data. The US index futures are trading down indicating a negative opening for DOW.

Source : Equity Bulls

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