Ashika Monthly Insight Flip July 2016

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JULY 2016 TECHNICAL VIEW Negatives: • • • • • Bearish ‘Double Top’ formation in daily chart. · Oscillators in neutral price territory with sell crossover. Indian VIX has been gradually inching higher. ‘Triple Top’ formation in DJIA Negative divergence in Crude oil prices Uptrend in Rupee to remain due to rising channel formation To sum up Indian equity market started the month on a positive note celebrating two years of Modi government and was cherishing the monsoon forecast. Several key events were lined up during the month such as Reserve Bank of India’s monetary policy meeting and Federal Open Market Committee’s (FOMC) meeting, worries over rate hike by the Federal Reserve in the US though had been haunting the market. On the domestic front though RBI kept policy rate unchanged but market drew strength from RBI’s accommodative policy action. RBI assured the markets that it would infuse liquidity depending on the situation. The central bank hinted at progressive lowering of average ex ante liquidity deficit in the system to a position closer to neutrality. CPI inflation for the month of May rose to 5.76% versus 5.47%, CAD narrowed sharply to $0.3 billion (0.1% of GDP) in Q4 of 2015-16, significantly lower than $7.1 billion (1.3% of GDP) in Q3 of 2015-16. With the rising CPI inflation, hope of interest rate cut gets dimmed in RBI’s next policy meet. Meanwhile, Mr. Raghuram Rajan also announced that his retirement as RBI governor when his term ends in September. In another development, Modi government opened its doors to more Foreign Direct Investment in nine sectors, including defence, aviation, food retail and pharmaceuticals. The expectation of passage of GST in this monsoon season in the parliament and the government’s move to ease the FDI regime is sure to boost the confidence of the market participants and India will continue to be the bright spot among its peers. While on the global front Fed in its meeting decided to keep interest rate unchanged citing poor employment data, the future guidance too remain dovish with no major rate hike expected in near term. On the Asian front, BOJ too maintained status-quo. Now the major anxiety or focus shifted to Brexit which posses a major risk for the global economy and lead to interest in safety assets i.e. bonds. The fight on Brexit or Bremain comes to an end. Britain voted to leave the European Union as the results from the landmark referendum showed. The outcome sets the country on an uncertain path and deals the largest setback to European Union. Quitting the European Union would also cost Britain access to the European Union’s trade barrier-free single market and mean it must seek new trade accords with countries around the world. Stock markets globally saw a tumble and India was no exception. The outcome resulted in fall in currencies, metal and oil and simultaneously resulted in appreciation in dollar, yen and surge in precious metal prices. Rupee also fell past 68 against US dollar, India-based companies and sectors that have investments and exposure to Britain also felt the heat. On the technical front lower top and lower bottom which is a Bearish structure according to Dow Theory is in place. Nifty during the month though started on a positive note but failed to keep the momentum alive and ended almost flat with a gain of 0.31%. The previous swing high of 8336 proved crucial for the market and was unable to breach past the resistance level. Now inability to break the resistance led to the conclusion that a possible bearish Double top formation might in place for Nifty. Further Nifty since March 2016 onward had been advancing following a rising trendline which was also breached during the month which further validates of negative biasness in the market. However one need to remember that since April 2016 onward Nifty had been moving within an extracting triangle and the high of 8294 marked as end of wave e, Nifty is still trading above b-d trendline hence possibility remains of a possible bounce back. Once index breaches the b-d trendline then the fall could be more sharper without any large bounce. Current value of this trend line or rather possible pullback level for the market exists around 7900. Nevertheless, the bearish gap remains between 8100-8188 with bears having an upper hand in the immediate near-term. Weekly charts display a ‘longlegged doji’ candlestick pattern that indicates indecision and hence Nifty could trade between the established range of 7900-8300 for the next few trading weeks. According to Elliot wave perspective Nifty had been following the 7-legged Diametric formation and inability to sustain above the trend deciding level of 8000 would mark as continuation of wave ‘h’ and fear of Index breaching the previous swing low of 7678 remains. Other global peers like DJIA too are trading weak with its bearish ‘Triple Top’ while Crude oil price continues to grind around the $ 50 mark. Going ahead in the forthcoming month though sentiment in the market has turned negative and so has the chart structure however the broader range for the market still remains amidst 7900-8300. Chances remains that Index might witness a pullback at lower levels. 48
FDI - WINDOW OF OPPORTUNITY BEST PERFORMERS FOR THE MONTH (NIFTY 100) WORST PERFORMERS FOR THE MONTH (NIFTY 100) 26.05.2016 27.06.2016 26.05.2016 27.06.2016 1 PNB 74.55 104.35 39.97% 1 INFRATEL 390.15 327.45 -16.07% 2 HINDALCO 90.30 120.00 32.89% 2 IDEA 113.80 100.30 -11.86% 3 BAJAJFINSV 1792.15 2166.00 20.86% 3 GLENMARK 865.15 780.10 -9.83% 4 SBIN 184.15 216.80 17.73% 4 UPL 592.95 543.50 -8.34% 5 VEDL 104.05 122.00 17.25% 5 IBULHSGFIN 718.95 659.25 -8.30% 6 HINDPETRO 849.65 975.00 14.75% 6 BHEL 128.60 119.15 -7.35% 7 AMBUJACEM 224.60 254.05 13.11% 7 ASHOKLEY 104.20 97.10 -6.81% 8 BANKBARODA 134.85 151.85 12.61% 8 TECHM 542.30 505.90 -6.71% 9 TATAMOTORS 399.25 447.95 12.20% 9 INFY 1234.15 1165.05 -5.60% 10 BEL 1124.00 1258.15 11.94% 10 CAIRN 141.20 134.50 -4.75% 11 BPCL 926.80 1037.00 11.89% 11 TATASTEEL 325.20 309.90 -4.70% 12 SHREECEM 12946.65 14440.00 11.53% 12 BOSCHLTD 21817.35 20876.60 -4.31% 13 ADANIPORTS 184.80 203.65 10.20% 13 TORNTPHARM 1382.40 1323.30 -4.28% 14 COALINDIA 280.85 308.00 9.67% 14 ICICIBANK 241.15 232.20 -3.71% 15 TATAMTRDVR 269.60 295.55 9.63% 15 SRTRANSFIN 1196.60 1157.00 -3.31% 16 DABUR 294.40 319.50 8.53% 16 PFC 167.35 162.25 -3.05% 17 NHPC 22.65 24.40 7.73% 17 APOLLOHOSP 1345.90 1306.00 -2.96% 18 TITAN 361.90 389.65 7.67% 18 AUROPHARMA 744.55 722.95 -2.90% 19 RECLTD 155.05 165.50 6.74% 19 ONGC 216.05 210.10 -2.75% 20 ACC 1504.05 1600.65 6.42% 20 MCDOWELL-N 2464.65 2401.00 -2.58% Source: NSE Indices Performance 26.05.2016 –27.06.2016 10% Sector Indices - Monthly Return (%) 8% 8.1% 6% 4% 2% 0.6% 0.8% 1.2% 1.5% 2.3% 2.8% 3.2% 3.3% 0% -2% -4% -3.4% -3.2% -0.8% TECk IT CD CG HC FMCG BANKEX POWER REALTY AUTO OIL&GAS METAL Source: BSE 49
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Ashika Monthly Insight Flip July 2016

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