Market Outlook and expectation for tomorrow (19082011)

Nifty opened today with an upside gap of 21.35 points, but soon fell to as low as 4934.80. Towards close Nifty climbed and closed at 4944.15. Altogether the index shed over 112 points today. The major index draggers were banking and IT stocks. NSE Bank Nifty lost 366.80 points today whereas CNX IT lost 217.65 points. The major index draggers were HCL Tech (-6.92%), Axis Bank (-5.28%), Reliance Infra (-7.44%), ICICI Bank (-5.13%), Sterlite (-4.46%), IDFC (-5.56%), SBI (-4.53%), Wipro (-5.61%), Reliance Capital (-5.57%)  and Jindal Steel(-4.46%). However, minor occasional recoveries could be witnessed. The gainers included DLF (3.02%) and RCOM (1.00%). JP Associates, Hero Motors, ACC and GAILS also recorded minor gains.

BSE Sensex closed with a downside gap of 379.90 points at 16459.92. The losers in BSE were Wipro (5.59%), ICICI Bank (5.16%), SBI (4.83%), Sterlite (4.58%), Jindal Steel (4.85%), TCS (4.23%), Hindalco (3.50%), Tata Motors (3.36%), Infosys (3.56%), HDFC (2.95%), Tata Power (3.29%), Tata Steel (2.07%), RIL (1.97%), Maruti (2.38%), Cipla (1.93%), Coal India (1.80%), Bharti Airte (1.26%), Sun Pharma (1.21%) and Bajaj Auto (1.05%).

The massive falls in Indian stock indices are said to be the outcome the concern over global economic recovery, especially the US and European economy. All major US indices fell on concern that the global recovery is slowing and also on speculation that the European banks are facing  capital inadequacy. The US job data revealed that the unemployment rate is increasing as the jobless claims went up above the forecasted level. The home sales in July declined beyond the expected level. The consumer prices have gone up more than the forecast in July. These indicate a slowing down of US economy. The European stocks also plummeted more than two years level. Major Asian stock indices also closed with losses.

Given the current trend, Nifty is likely to open with a down side gap tomorrow and may have a support level at 4891.33. If went further down it can touch 4838.52 or even 4692.07 at the bottom level. An upward movement can pull up to 5037.78. If moved up further can test 5131.42 or 5277.87. However, the decline in food inflation rate in India can give a minor push, but may not last long on concern of global slowdown. The major index pullers may be banking and IT stocks. However Nifty may gain minor support from defensive stocks in the short-run. The banking system is facing the threat of another interest rate hike, which can invite negative sentiments into the market.  The put –call ratio is above 1.2. The general trend in the market is likely to be gloomy.