Weekly Outlook (March 08, 2016 – March 11, 2016)
Nifty weekly performance (February 29, 2016 – March 04, 2016):
The index dipped below the 6,900 support levels momentarily on Monday but has snapped back quickly from there onwards. It has rallied one-way from there till 7,500 levels. The index now faces resistance around 7,600 levels. The RSI on 75 minute chart is also pointing towards exhaustion in momentum. Thus, we may expect some profit booking or consolidation in the coming week.
Nifty Prediction for Week (March 08, 2016 – March 11, 2016):
Support for the index lies in the zone of 7230 to 7280 from where the index has broken out of the short term top. If the index manages to close below this levels then the index can drift to the levels of 6900 where channel support for the index is lying.
Index has closed around the resistance zone of 7500 from where the index has broken down after making the double bottom pattern. If the index manages to close above this levels then the index can move to the levels of 7700 where 100 Daily SMA is lying.
Broad range for the week is seen from 7200 on downside to 7700 on upside.
Weekly News and Highlights:
1) The People's Bank of China (PBOC) resumed its easing cycle on Monday. It injected an estimated US$ 100 billion worth of long-term cash into the economy by cutting the reserve requirement ratio (RRR). The central bank announced that it was cutting the reserve requirement ratio, or the amount of cash that banks must hold as reserves, by 50 basis points (bps). This took the ratio to 17% for the biggest lenders.
The move is aimed at cushioning the pain from job layoffs and bankruptcies in industries that have been plagued by overcapacity. The cut is effective from March 1, and the central bank hopes that it will boost liquidity in the financial sector.
One shall note that, the latest cut to the RRR is the fifth in a year. There have been six interest rate cuts since November 2014 and Beijing has also resorted to a variety of other methods to encourage growth and expand credit (subscription required). What difference does this cut make needs to be seen in the coming days.
2) Data released on Tuesday pointed that US manufacturing appeared to stabilize in February. It was noted that production accelerated and new orders held steady at higher levels. The Commerce Department said that new orders for manufactured goods rebounded 1.6% after an unrevised 2.9% drop in December. Orders for transportation equipment jumped 11.4%. Orders for non-defense capital goods excluding aircraft rose 3.4% instead of the 3.9% increase reported last month. Further, inventories of factory goods fell for a seventh straight month. This suggested that factories were making progress in reducing the inventory glut.
In another report, the Institute for Supply Management (ISM) reported that its index of national factory activity increased 1.3 percentage points to a reading of 49.5 last month. This was recorded as the highest reading since September. One shall note that a reading below 50 indicates a contraction in the manufacturing activity, which accounts for 12% of the US economy.
On Friday, the US Labor Department released employment data for the month of February. It stated that US employers added more jobs than expected in February. However, wages declined compared to a month earlier.
3) Eurozone producer price index (PPI), a key gauge of inflation in the manufacturing sector, fell by more than expected in January. Data released pointed out that prices at factory gates in the 19 countries sharing the euro currency dropped by 1% month-on-month for a 2.9% YoY decline. This was recorded as the steepest month-on-month fall since December 2014. Further, consumer prices in February fell 0.2% YoY. It shall be noted that the European Central Bank (ECB) wants to keep consumer price inflation below, but close to 2% over a two-year horizon.
A dismal inflation can impel the ECB to take monetary action at the ECB's policy meeting which is scheduled next week.
Comments