Indian Stock Markets: Yes, It was Logical!!!

US markets zoomed up in last half an hour on Thursday, despite all negative news there. Indian markets were having almost all positive news, including US indices being up. Still, we fell and closed with deep cuts. If what happened in US is to be correlated, what happened in India is purely logical. Moral of the story is, the entire world markets are being manipulated by operators. With unexpectedly lower inflation below 9 and better IIP numbers, market is confident about rate cuts by RBI and fuel price cut by Oil Ministry. In normal case, Indian markets should have zoomed up 6-8% higher if we compare with US markets. Sensex opened lower, hit the day's high at 9826 and sunk to the day's low of 9267 and closed at 9385, still down 1.6%. It is worth noting that such a fall was articulated by concentrated selling in index heavy Reliance, ONGC, Tata Steel, ICICI Bank and similar counters, one by one at a time, in thin volumes. Overall turnover was below average. Market depth remained negative, AD ratio being 2:5. FII's and DII's both were reportedly net sellers, FII's more than 800 crores and DII's just above 20 crores.

Asian markets on Friday opened big gap up, after touching the day's highs, pared the gains after seeing India struggle in negative zone, still ended with modest gains although at almost the lowest, Nikkei and Hangseng up about 2.5% and others closer to the flat line. Europe too started off well, climbing to over 4% gains, gave up all to end almost at the lows, still with modest gains, Cac up 0.67%, Ftse up 1.53% and Dax up 1.31%. With Italy joining Germany and UK with contracting GDP growth, their performance was good. US markets opened with nominal losses soon went deep down to the day's lows. However, the indices returned to the flat line just an hour before close, only to dive down to close near the lows. Thursday's last hour leap up was thus reversed on Friday, still maintaining well above Thursday's lows. Dow was down 3.8%, Nasdaq down 5% and S&P down 4.2%. Retailers issuing negative guidance for the forthcoming holiday shopping season, advance October retail sales declining more than expected and September business inventories slipping more were attributed to the sentiments. Adding to the woes were Citigroup and Fidelity reportedly reducing their workforce. Crude is lower at US$ 56.45/bbl. Dollar has improved again, 48.99 against Rupee and 97.05 against Yen.

Rumours about Reliance having shut down its Baroda polyester plant to cut production targeted the counter on Friday, which otherwise was taking the market up. It is reliably learnt that the shutdown was for annual regular maintenance. If someone has a different know-how of it, please share it here. With lower crude price and inflation nosediving below 9, we may expect some actions from RBI and Oil Ministry to cut Bank rates and Fuel price respectively. This may happen as early as Monday or at the latest during the week. G20 meeting during the week-end will also bring in some pleasant surprises. Technicals are totally unreliable in today's market, due to the high volatility coupled with lower volumes. Hence, a dip in US stocks at f** end of the session may not affect Indian stocks, more so since we did not react positively to the 6-7% jump in US indices on Thursday. If we look at technicals, we are on our way to retest the 52 week lows. However, positive announcements and oversold situation will bring in a relief rally at least, which may last 3-5 sessions.

Sensex may open gap down, however likely to bounce from the Friday lows. If we open below 9267 being Friday's low or break it intra-day, then 9000 Sensex will be tested. 9704 to 9885 range is having too much resistance and it will be a herculean task to break above this range even if we have some positive breakout. Day traders may buy above 9493 and sell below that. A close above 9587 will endanger the bearish trend and a close above 9872 will initiate an uptrend. Buy low and sell higher will be the right tactics rather than attempting to sell higher and buy lower. Investors may continue to add at lower levels. If the bears cover their positions seriously or serious institutional buying emerge, there could be unexpected heavy flare up in stock prices, surprising the most optimistic even.

Supports: 9326, 9159, 9047, 8934 Resistances: 9606, 9718, 9885, 10052
Likely Trading Range: 9035, 9772

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