Ashika Monthly Insight August 2016

STRONG ON CONSUMPTION
Key takeaways from July 2016:
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IIP surprised positively at 1.2% in May while it
shrunk by 1.3% in the previous month.
CPI inflation accelerated marginally to 5.77% in June
from 5.76% a month ago.
WPI rose to 1.62% in June from 0.79% in May.
IMF slashed India’s 2016-17 growth forecast by 10
basis points (bps) to 7.4 per cent from an earlier
forecast of 7.5 per cent.
Cabinet approved the 7th Pay Commission’s proposal
to raise salaries and pensions for central government
employees
In a bid to boost credit growth in the economy, the
Centre announced a sum of Rs.22,915 crore for
recapitalisation of 13 public sector banks
Classical theory of Technical Analysis
Indian equity market though started the month on a dull
note but rallied at the latter half of the month and ended
with a handsome gain of 4.57%. Volume in the market
too witnessed incremental addition. The broader market
represented by Mid-cap and Small-Cap Index witnessed
sharp rebound absorbing global turmoil which indicates of
strong investors ‘appetite. Hence strong outperformance of
the broader market represents of a larger market
participation and inherent strength in the market.
On the technical front Nifty had been maintaining its
higher high formation in both daily and weekly time frame.
Small consecutive bars at every intervals indicates that
upward momentum in the market is slowing down and
indicates possibility of further price consolidation in
sessions to come, however medium term trend remains
unequivocally upward. Nifty is now struggling to breach
past its previous swing high of 8654 scaled on July 2015.
Inability to breach past the said resistance level would
again drive profit booking activity in the market and might
lead to a decisive correction. To further add Nifty since
March 2016 onward had been on a rising spree laying its
foundation on the upward rising trendline. The elevated
trendline now lays support around 8250. Hence it can be
concluded that downside in the market seems limited and
broader range for the forthcoming month lies amid 8200-
8900. Another interesting observation that need to be
adhered to is the bullish ‘Inverted Head & shoulder’
formation in daily chart since September 2015 and the
July high of 8654 if acknowledged as the neckline of the
assumed pattern then one should brace himself for a
mammoth rally surpassing the previous all time high of
9119.
Multiple price structure can be seen in Nifty as the rally
since Mar 2016 onward had been within the rising channel
formation. The said pattern is heading higher to complete
its fourth leg. The upper panel of the channel line is likely
to initiate resistance around 8800-8820. Hence based on
the present observation it can be concluded that if the
pattern materializes the upside seems limited till 8800-
8850 and then onward intermediate correction can crutch
in though downside seem limited since lower panel of the
elevated channel comes around 8250. The said pattern to
concludes that Nifty might remain rangebound amidst the
broader range of 8250-8750.
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