Nifty touches 5300 and sees a correction

The Nifty peaked to 52 week high Monday to 5329 and yesterday corrected 40 points closing at 5262.45. The European rescue plan for Greece which issued seven year bond on a higher market rate was one of the major reasons for the yesterday’s gains around the markets including Asia. However today’s drop in NSE Nifty was due to the profit booking in technology, pharma, telecom, banking & financial, auto counters.

HCL Tech, HDFC Bank lost more than 3% yesterday, Ambuja Cement, Sun Pharma, Garsim, and Hero Honda lost more than 2% from Mondays close. On the other hand there was major buying happening DLF and TATA motors which was up 3.23% and 2.23% respectively. IT stocks continued to struggle, IT companies which is major contributor to India50 index lost nearly 2.53%. The appreciation of rupee which is at a 19 months low at 45 against the US Dollar was also building pressure on IT companies. Though the nifty closed in red losing 0.76% from Mondays close, Asian indices were in the green zone. Shanghai composite gained 0.65% closing at 21,374.79 and Nikkei gained 1.01% closing at 11,097.14.

Thought the psychological level of 5300 has been broken and closed below for the day; the bullish outlook of the India Inc could hit the peak of 5350 in near term. With earning season in coming weeks, the nifty is at very crucial level facing resistance at 5350 in the near term and support at 5183. The support level could be a crucial level to watch as it has seen an upside twice from these levels. This NSE nifty futures expiry can bring some more correction happening for the week. IT could be sectors to watch for which can affect the Nifty in near term.

Mohammed Rabbani

USDCAD on a Low since July 2008.

The US dollar plunged to an eighteen months low against the Canadian dollar at 1.0061. The Canadian dollar has been on bullish trend as there has been huge purchase of CAD denominated assets. The value of stocks, bonds, and money-market assets purchased by foreigners rose from 7.75bn to 11.83bn which is also higher than the February figure of 11.23Bn which is a definite plus for Canada. Also unemployment rate of Canada fell from 8.3% to 8.2% which was expected to remain steady at 8.3%. The Treasury International Capital (TIC) long term purchase data for the US which shows purchase of the US assets came far below at 19.1bn from the expected figure of 50.3Bn. These could be signals of the two major purchasers Japan and China looking for alternatives markets like CAD for making their investments purchases. The Consumer Price Index (CPI) which shows change of prices and services purchase by consumers accelerated from 0.1% to 0.7% more than the expected figure of 0.3%. The Lending Index which reflects the combined reading of economic indicators which reflect the overall performance of Canada advanced from 0.7% of January to 0.8% but was below the market expectation of 0.9%. On the other hand the building permits data for the US almost came out equal to the forecast at 0.61m however dropped from 0.62m of previous month’s figures. Producer Price Index (PPI) also drops highest in past 7 months from 1.4% to 0.6% which can be are signs for US recovery measures. However the unemployment claims for US also came out higher than the expectation at 457K from the expected figure of 456K which is an important data that reflects US economic recovery.



From the technical point of view, for the past week it has been trying to face the resistance at 1.0287, if it breaks this resistance level, next resistance could be placed at 1.0362, the near term support is at 1.0148. The crude oil inventories data and the natural gas storage data which affect the currency pair is expected to rise. The Bank of Canada is expected to comment on the overall outlook of the Canadian economy and there is speculation that there might be an interest rate hike. Though USDCAD touched the low of 18 months low, there has been a modest recovery seen for the week giving indication of US markets picking up. If the US continues with the same pace or a better rate of growth, USD can see an uptrend in near future.

Mohammed Rabbani

USDJPY indecisive and volatile

The Japanese yen has been impulsive for the week with mixed macro economic data released last week. The Japanese Household Confidence Index rose for the second consecutive month from 39 to 39.8%, which was much below the forecast of 40.6%. Also with no surprises, the Bank of Japan (BOJ) kept the overnight call rates unchanged at 0.10%. However BOJ doubled the budget of the 3-month lending programme, which it announced last December, from 10 Trillion JPY to 20 Trillion JPY. This effort would increase the liquidity of the market which will make curb to the falling prices of the export driven economy. In spite of the stimulus, the Japanese Business Sentiment Manufacturing Index has dropped from 13.2 to 4.2, which is a concern for the economy in the long term. However the BOJ has upgraded the overall assessment of the economy as “picking up steadily”, is ready to take “aggressive and comprehensive measures” to tackle the deflationary pressures. Also, the Japanese All Industry Activity, which indicates the change in total value of the goods and services purchased by businesses has grown from negative growth to positive (from -0.2% to 3.8%), which is a very encouraging number. But the US Fed decision to keep the Federal Fund Rate near zero did not lure the US Dollar against the JPY. Also, The Reserve Bank of India’s unexpected decision to increase the interest rate by 25 bps affected the dollar-yen pair where the dollar rose against the yen.

Currently, the JPY is facing a resistance at 91.13, which has not been broken during the month and the near-term support at 89.67. Japan’s monetary policy scheduled to be released this week will give investors the outlook on overall economic performance for JPY and also how the monetary policy would be in future to control deflation. Tokyo’s Core Consumer price Index (CPI) and the National Core CPI publications should be watched by investors.
Mohammed Rabbani

“Say what is true, although it may be bitter and displeasing to people.”-Prophet Muhammed (Peace be Upon Him)

EURUSD recovers during the week

Euro has made a strong recovery this week from the low of 1.3639 against the US Dollar. Euro has been struggling for months now due the Greece debt tribulations but Euro Zone countries agreed to assist Greece. The Euros recovery can be attributed to the French Industrial Production data which gained 1.6% from the previous low of -0.2% which is a major contributor to the Euro Zone. However, Germany’s, Trade balance was forecasted at 16.4bn Euros versus published 8.7bn Euros from the previous of 16.6bn Euros, which could be pulling down the EUR against the USD. The statement of the Fed Chairman Mr.Ben Bernanke to keep the federal fund rate low near zero for “extended period” didn’t lure the markets and investors. On the other hand, US Trade Deficit came down to $37.9B from the previous of $39.9bn. This6.6% decline could be a good signal for the USD in the near term. The Core Retails Sales data for the US was better than expected which was a 0.3% increase, showing indications of economy picking up. European Central bank president Mr. Jean Claude Trichet has positioned confidence on the rating agencies that they would not cut the Greece’s credit rating and has faith on Greece government measures to tackle the issue. However the German ZEW Economic Sentiment index expected was 43.5% which dropped to 44.5% for the month from the previous figure of 45.1% shows the Euro Zone continues to struggle in front of the US positive recovery measures.

Greece is yet to come out with the clear roadmap on the austerity measures to tackle with the budget gaps it is suffering. Investors should watch out for US Producers Price Index, Unemployment Claims data and the EUR Current Accounts data for the week which could have serious impact on the traded pair. From the technical perspective, there is at a very crucial level at 1.3791. The near term resistance for the Euro could be placed at 1.3849. The Support stands at 1.3643.

Mohammed Rabbani

Australian Dollar continuously gains against Euro

The EUR made an all time low of 1.4802 against the Aussie Dollar making the Aussie dollar stronger. This was due to the Greece debt worries which have been around for past 2 months now making the EUR weaker. Despite Greece’s efforts to reduce the debt through issuing bonds (which were oversubscribed), investors were not appeased much. The debt concerns of Greece and slow recovery of the US have resulted in the investors choosing Australian dollar over a period now. Also the Australian economy has been with some close ties with China which is major consumer of its mining actives. The monthly NAB Business Confidence Index has also made an impressive comeback boosting the AUD (19 published vs. 15 expected). Last week’s Reserve Bank of Australia (RBA) decision to increase the overnight cash rate by 25 bps has also made AUD an attractive destination for carry trade. The economy’s unemployment rate was in line with the forecast at 5.3% but slightly higher than the January’s rate which was 5.2%.

From the technical point of view, the near term support would be at 1.4923 and next support at 1.4875. The resistance would be at 1.5042 and next resistance at 1.5109. Investors should watch out for AUD monetary policy meeting and the Germany’s economic ZEW Sentiment data release (March 16) which could affect the pair. However from the trend perspective, the EUR continues to remain bearish against the Australian dollar.

Mohammed Rabbani

JPY plunges against the dollar

The USD made a strong comeback against the JPY this week touching the three-week high at 90.81. Japan’s GDP grew by 0.9% in the current quarter against the last figure of 1.1%, which was below the market expectations. The U.S dollar gained because the jobless claims ,which decreased for the second consecutive week from 468K to 462K. Despite the 7.2 trillion Yen stimulus package that was introduced in December by the Japanese Government, consumer spending did not show any significant increase, which also contributed to the falling price of JPY against the USD . But Japanese’s corporations are still confident of the rebounding demand especially arising from Asian countries like China. However, there is speculation that the BOJ would add more funds to the financial system to the second largest economy suffering from deflation. Also, the government is open towards the option of currency intervention if the prices do move unexpectedly against the markets. The current recovery of the U.S is also building pressure on the Yen, which continues to plunge.

From the technical point of view the near term support would be at 90.29 with the next support at 89.89. From the upside 90.75 is the near term resistance and if it continues to appreciate the next resistance level is at 91.12. Other than the U.S macro news, the BOJ press conference would be important for investors trading on the Yen.
Mohammed Rabbani
Mohammed.rabbani@xtb.in
XTB India