Weakness persists in Indian Markets - Alex Mathews

Markets had opened with a negative note tracking absolute weakness in the Asian front and we saw major crash in the markets by noon after European markets opened lower and touched two year low. Later in the second part of the day we saw lower level recovery but the weakness in the markets made it close at lower levels. We had seen the Nifty VIX jumping over 12% and moving above 30 indicating increase in investors’ fears. Asian markets corrected today on expectation that Chinese manufacturing will shrink amid faltering economy. European markets too were in red as Germany failed to get sufficient bids at an auction of bunds and US futures remained in red.

Rupee is still trading weak and is around 52.47 against dollar and is one of reason for the selling that we are seeing now. Falling rupee will make it difficult for RBI to support the ailing economy by lowering the interest rates of the reserve requirements. But now that the rupee has fallen drastically and RBI has made it clear that there is a limit for them to intervene in the currency market, then it will cause further rise in money supply causing inflation to shoot up further. If that happens RBI may be forced to hike the interest rate which will have a negative impact on the markets as a whole.

Apart from that the November happening tomorrow the Nifty PCR was below 0.60 which means that more call options are open rather than put options. When more call options are open, a small selling can cause the call buyers to book loss by covering their calls will keep the Nifty under pressure. Dismal numbers were there on the rollover side with Nifty rollover around 46.8% at the end of the day. However, tomorrow being the last day of November expiry and as Nifty is trading deep in the oversold region we may see a bounce back towards 4700 and 4750 levels. On the other hand Nifty is having support at 4640 and 4594 levels. Investors should keep in mind that, as the outlook for the markets remains negative, a fall below 4594 will cause more selling.

On the sectoral front, we saw selling pressure in capital goods, technology, IT, oil and banking leaving just consumer durable on the gainers side. Metal stocks came down on weak economic data from China. Sugar stocks were in demand today after government allowed sugar exports.

Source : Equity Bulls

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