WPI inflation to stand slightly higher due to rise in crude oil prices : Amrapali Aadya Trading & Investments

Mr. Abnish Kumar Sudhanshu, Director & Research Head, Amrapali Aadya Trading & Investments for your consideration:

Week began on the optimism amid rate cut from the RBI governor in its bimonthly monetary policy. Moving further, benchmark indices weighed down by losses in rate sensitive auto and realty stocks on the back of uncertainty about the rate cut next day in RBI policy meet. Finally important event arrived where decision regarding interest rate was about to out. Unexpectedly, RBI governor kept the repo rate unchanged at 6.25%. Initially market participant took it negatively by selling their stocks, however later sign of relief came at Dalal street after the impact analysis of holding the rates. From the Industry point of view, it is desirable to have the lower interest rate but when the system is flooded with low cost deposit and liquidity, where rates are already at the comfortable level, further cut could have triggered inflation risk. Post policy day, market remained traded on the global news and with trading in thin range. Despite of being volatile week, market finally ended week on the flattish note. In the coming week, benchmark indices could react to several economic data news. On the Friday evening, Industrial production and manufacturing data's are expected to declare. We believe both the data to stand on the softer note on the back of demonetization and disruption in the cash circulation.

On Monday, Inflation data are expected to declare, where we are also expecting softening in inflation number following seasonality, however WPI inflation to stand slightly higher due to rise in crude oil prices. Further, many more corporate results are expected to declare, even they can put their earning impacts on the indices. Interesting and important campaigning for the first phase of the high-stake Uttar Pradesh assemble election came to end yesterday in 73 constituencies spread over 15 districts including riot-scarred Muzaffarnagar and Shamli. Polling in these constituencies will be held on 11 February. We believe, market to take cues from the U.P. polling also and behave similarly. In recent onion polls, As per the bookies, prediction of hung assembly is high with the BJP and the Samajwadi Party-Congress coalition seen to be finishing neck and neck. Overall, we foresee range bound trading in the benchmark indices for the coming week, however if any good news comes in regards to receiving the majority victory of BJP in UP, we could see rally in the market.

Nifty 50 form a Dragonfly Joji candle in its weekly chart as it recovered from the lows. A Dragonfly Doji is formed when bulls actively protect the lows. An expansion of the chart from weekly to daily candles shows post budget Nifty 50 is either formed spinning tops candles or dragonfly Doji's as bulls are struggling to get grip of the market and they are unwilling to give up. It may some tine to return to a decisive path.

Nifty 50 to find its support around its short term (20DMA) of 8600 and it could face resistance at 8900 and above.

Source : Equity Bulls

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