*Regulatory Action, Geopolitical Tension Spooks Market!!*

*Regulatory Action, Geopolitical Tension Spooks Market!!*

*ABML: CNX Weekly Techno-Derivatives Snapshot (14/08/2017 – 18/08/2017):*

*Dear Friends,*

*Following is the Analysis on Several Indices including Nifty, Bank Nifty, Major Sectorial indices, All F&O Stocks, Small Cap & Mid Cap along with VIX & USDINR and Derivatives Outlook in addition to Global Markets outlook including Crude.*

*Indian Markets have witnessed a significant 4% cut post cascading effect due to SEBI crackdown on “Shell Companies”, stand-off in Doklham area between India & China & escalation of Geo-Political tensions between US & North Korea.*

*Sectorially*,

Realty Sector witnessed highest cut to the tune of 9.8%, followed by Pharma (-8%) & Auto, Power & Capital Goods ending with cuts between 5-6% apiece.

Banking, FMCG, Oil & Gas and Metals too ended 3-4% negative for the week.

*Geo-Political tensions between US & North Korea has escalated post intensified war of words* coming from North Korea regarding it carefully examining plans of considering an attack on U.S. Pacific territory of Guam & in reply US President Donald Trump boasting the strength of its nuclear arsenal & responding that further threats from North Korea would be met with ‘fire & fury’.

There have always been tensions arising in the Korean Peninsula, however what is different this time is the scary threats & intensification of war of words which have to be taken into cognizance.

Also Unpredictability of President Trump’s behavior adds fuel to the fire.

This has also led to the Dollar Index remain under pressure. Along with the geo-political concerns what’s affecting Dollar more is the lack of progress on the US Fiscal stimulus & tax reforms & due to increasing doubts on President Donald Trump’s ability to deliver on its economic agenda after Republican senator’s effort to pass their own healthcare bill failed.

*Unexpected regulatory order by SEBI on listed companies identified as ‘Shell Companies’ hurt sentiment raising concern of probe getting wider*. Restrictions include limiting trading in the affected Company stocks to once a month and curbs in the trading of shares of the said companies held by their promoters & directors. Suspension in trading came as a shocker to investors with some big names figuring among shell Co list which will lead to significant loss in credibility.

However this order has a cascading effect due to Margin funding crisis & also on fear of more such companies may be bought under scrutiny. 

*India’s June IIP came in at -0.1% down from May month’s 2.8% mainly due to de-stocking ahead of July 1 GST implementation deadline*.

The cumulative growth for the period Apr-Jun 2017-18 has been recorded at 2%.

Also India’s manufacturing PMI has fell sharply to 47.9 in July from 50.9 in June & Services PMI contracted to 45.9 in July from 53.1 in June entirely due to transitional impact with the introduction of GST.

After the demonetization-related fall last December, this is the first time that the manufacturing index has fallen below the 50 threshold, and the rate of contraction is the steepest since March 2009.

*Progress of Monsoon will be closely watched as Till August 9 2017, cumulative rainfall was 3% below normal with parts of South India & west India remaining deficient*.

However, IMD continues to stick to its forecast of normal rainfall for second half of monsoon season. Rainfall during rest of August and September is expected to be 100% of the long-period average (LPA).

What this means is that the rainfall which at the start of the season was expected to be in excess would end the season as Normal. 

*Going Forward, Market Participants would keenly focus on the geo-political stand-off between India-China & in Korean Peninsula, Global Market Trend, progress of monsoon rains, India CPI Inflation (14 Aug), WPI Inflation, USD-INR movement, Crude Oil Prices, FII Fund Flows & Dollar Index*.

*CNX Nifty* *(CMP 9710):*

Index in the past week has met with resistance at 10100 zone & witnessed a correction upto 9680 zone, finally closing 4.5% Negative W-o-W. 

Index has closed forming a big bearish engulfing pattern from highs in addition to its Spinning Top Candlestick pattern a weak ago highlighting a significant reversal on a larger time-frame.

Post reversing from resistance zone at the upper trend-line of the upward sloping channel in which Nifty was moving, it definitely suggests a pause in the upmove & recent highs will act as a strong resistance for the near medium term.

Also, Index may be down by 4.5% for the week, but the broader market has weakened much more than the index. The breadth of the market in the past week does suggest that the correction can continue & accelerate going forward.

Now Going Forward, as the Medium Term Trend has clearly turned down, Selling pressure at all rises will be witnessed.

Index will face resistance @ 9810-9830 which is the 50 DMA & Till 9830 is not crossed, expect further fall upto 9580-9600 which is 23% Fibonacci retracement of the entire rise from 7893 (Dec 2016) to10137 (Aug 2017).

Further break of 9580, will lead to deeper cracks upto 9468-9380.

Only on a cross-over above 9830, Short-Covering upto 9923-9980 will be witnessed.

Overall, For the next week, Nifty Range could be 9576 – 9867.

Technically, Key Oscillators RSI, Stochastic & MACD are below their respective averages on the Daily as well as Weekly Charts indicating selling pressure on rises.

On the Derivatives Front,

Highest OI is concentrated at 9800 followed by 9500 PE with 44 lakh each and 10000 CE with 54 Lakhs; making a range of 9580 to 9850 levels in current series. 

*BANKNIFTY* *(CMP 23985)*:

Now Going Forward, as the Medium Term Trend has clearly turned down, Selling pressure at all rises will be witnessed.

Index will face resistance @ 24300-24400 & Till 24400 is not crossed, expect further fall upto 23350-23400 which is 23% Fibonacci retracement of the entire rise from 17819 (Dec 2016) to 25198 (Aug 2017).

Further break of 23350, will lead to deeper cracks upto 22950-22800.

Only on a cross-over above 24400, Short-Covering upto 24800-24950 will be witnessed.

Overall, For the next week, Nifty Range could be 23950 - 24850.

Technically, Key Oscillators RSI, Stochastic & MACD are below their respective averages on the Daily as well as Weekly Charts indicating selling pressure on rises.

* NIFTY AUTO INDEX: CMP 10457: Selling Pressure likely to be witnessed on rises.*

Going Forward, Till resistance zone of 10750 is not crossed, Index will retest support @ 10200-10100. Only on a cross-over above 10750, short-covering upto 11000-11100 will be witnessed

*NIFTY FMCG INDEX: CMP 24762: Selling Pressure likely to be witnessed on rises.*

Going Forward, Till resistance zone of 25000 is not crossed, Index will retest support @ 24400-24300. Only on a cross-over above 25000, short-covering upto 25300-25500 will be witnessed

*NIFTY IT INDEX: CMP 10647: Buying Support likely to be witnessed on dips.*

Index will get support around 10450 & Going Forward, Till 10450 is held, Index will continue its upside upto 11050-11100. Only on a breach below 10450, support zone 10250-10100 will be retested.  

*NIFTY METAL INDEX: CMP 3216: Selling Pressure likely to be witnessed on rises.*

Going Forward, Till resistance zone of 3350 is not crossed, Index will retest support @ 3100-3050. Only on a cross-over above 3350, short-covering upto 3600-3750 will be witnessed

*NIFTY PHARMA INDEX: CMP 8521: Selling Pressure likely to be witnessed on rises.*

Going Forward, Till resistance zone of 8850 is not crossed, Index will retest support @ 8200-8100. Only on a cross-over above 8850, short-covering upto 9100-9250 will be witnessed

*USDINR (CMP 64.12):* 

Till USDINR holds 63.50, can rebound upto 66-66.50 zone.

Below 63.50, will head further lower upto 62.50-61.

*BRENT CRUDE ($ 51.87):*

Till Crude prices holds 49, expect a rebound upto 54-55$.

Break-Down below 49, will lead to short-covering upto 44-43.

*DOW JONES (CMP 21858):*

Dow Jones in the last week has closed 1% negative.  Going Forward, Till resistance zone of 22050-22100 does not cross, Index will test support @ 21450-21350. On a cross-over above 22100, upside upto 22400-22550 will be witnessed.

    

*US DOLLAR INDEX (93.39):*

Relentless Selling Pressure is witnessed in US Dollar Index & Hence Till US Dollar does not cross 95.50, it can retest 91.50-91 would be witnessed.  Above 95.50, will retest supports of 98-99 zone.

*NSE Midcap: (CMP 17360):* 

Index has closed 6% negative for the week underperforming with the broader indices which closed 4% negative for the week. Going Forward, Till resistance zone of 17700 does not cross, Index will test support zone upto 16960-16800. Cross-over above 17700, will lead to a covering upto 18100-18300 supports.   

  

*BSE Small Cap (CMP 15,036):* 

Index has closed 6% negative for the week underperforming with the broader indices which closed 4% negative for the week. Going Forward, Till resistance zone of 15400 does not cross, Index will test support zone upto 14700-14500. Cross-over above 15400, will lead to a covering upto 18850-18900 supports.   

*VIX (15.20):*

Going forward, 12.50 zone is extremely crucial support on VIX & Till 12.50 holds, expect a further upmove upto 18.50-19. 

Only Below 12.50, VIX will cool-off upto 10-9.

  

Nifty Futures have closed at 27 point premium compared to 42 points in the prior week.   

 *Q1 FY18 Corporate Results for the Coming Week:*

14th Aug: Grasim, Granules, Apollo Hosp, NBCC, Coal India, DCW, Jain Irrigation, JK Tyre, Tata Power;

17th Aug: Dish Tv, Eris Life;

22nd Aug: DCM Shriram;

23rd Aug: Castrol;

 Any Comments / Feedback is Welcome.

Warm Regards,

Sudeep Shah,

9320056400.

ABML Research