Markets have become super volatile and it is becoming more and more difficult to gauge the mood and direction of the market. One does understand that the markets are being driven by the way FII’s trade, but inferences from there also are not clear.
Last week the markets gave us an example of how they behave and what volatility is. From the table below one can see that the net change in the SENSEX for the week was a mere 55.97 points while the net daily change was a massive 992.57 points. Similar levels for the NIFTY were a net change of 2.40 points and a weekly net daily change 292.50 points.
| SENSEX | |||
| Date | Cls level | Prv Day | Net Change |
| 27th May | 20030.77 | 19704.33 | 326.44 |
| 28th May | 20160.82 | 20030.77 | 130.05 |
| 29th May | 20147.64 | 20160.82 | -13.18 |
| 30th May | 20215.40 | 20147.64 | 67.76 |
| 31th May | 19760.30 | 20215.40 | -455.10 |
| Total | 992.53 |
| NIFTY | |||
| Date | Cls level | Prv Day | Net Change |
| 27th May | 6083.15 | 5983.55 | 99.60 |
| 28th May | 6111.25 | 6083.15 | 28.10 |
| 29th May | 6104.30 | 6111.25 | -6.95 |
| 30th May | 6124.05 | 6104.30 | 19.75 |
| 31th May | 5985.95 | 6124.05 | -138.10 |
| Total | 292.50 |
The movement one saw reflects the FII flows, GDP data which was at 4.8% for the fourth quarter 2012-13 and 5% for the year, the political situation and the global markets. The net weekly change in the markets should be viewed in context to the sharp fall in the previous week when the SENSEX fell 2.87% and the NIFTY fell 3.29%.
Coming to FII flows they were at around Rs 3,330 crs for the week. They were buyers for the first four days and turned sellers only on Friday. What is disturbing however is the fact that they have been net sellers for seven trading sessions in a row in the debt market and have pulled out Rs 6,200 crs. The Indian Rupee in the week has depreciated from Rs 55.66 to Rs 56.50. This rupee fall is cause for concern and even though crude prices have been soft, the advantage would now turn to negative because of the fall in the value of the rupee. At current levels one should expect further price hikes in the case of petrol and diesel in the coming weeks. Readers would remember that the prices were hiked from the midnight of 31st May.
In the course of the previous week’s movement the markets have made an inside day on the weekly chart with a long body indicating weakness. The markets need to make a decisive breakout or breakdown from here. The levels for the same are 5936 and 6229 on the NIFTY which are the intra week high and low for the week ended 24th May. Similar levels for the SENSEX are 19568 and 20443. We need a nudge to breakdown and have to climb a mountain to breakout.
Use rallies to exit long positions but expect a rebound before a fall.
