By V K Sharma
The Nifty slumped 293 points or 1.17% on Friday and 383 points or 1.52% for the week to close at 24852. During the week, it slumped 532 points from its opening level on Monday to 25801 on Friday before rising to close at 25,852.
This sharp fall last week has crafted a bearish engulfing pattern on the weekly charts. Besides the close is below its 20-day exponential moving average (dema). These are indicators of further weakness ahead.
A bearish engulfing pattern, a candle stick pattern, is formed when the opening and high of the week are higher than the previous week’s high and the closing is lower than the last week’s low. The weekly candle thus completely overshadows the candle of the previous week.
The week ended 30th August had a high of 25268 and a low of 24874. The week just ended had a high of 25333 and a low of 24,801. The closing on Friday was 24,852.
So where do we go from here?
The markets had made a low of 23983 on the 5th of August. A higher low was formed on the 14th of August at 24099. Joining these two lows we get an upward-sloping trendline, which gives us support in the region of 24484-24500. Mind you this is upward sloping so it would keep on rising with each passing day. This support is likely to be a feeble one.
Slightly stronger support comes from trendline no 25, seen here in the accompanying chart. That support is at 24,150 for next week.
Meanwhile, US stocks have sold off sharply Friday after the latest jobs report renewed worries over a softening labour market. Both the Dow and the S&P 500 snapped a three-week winning streak. The weekly loss was the largest since March 2023.
The Nonfarm payrolls increased by 142,000 during August, up from 89,000 in July but below the 161,000 consensus estimate. The July and June numbers were revised lower, which makes it likely that the August numbers too will be revised lower.
The unemployment rate, which is calculated by a different survey, fell to 4.2% on expected lines.
It is now a foregone conclusion that the Federal Open Market Committee (FOMC) the policy-making arm of the U.S. Fed, will cut rates when it meets on the 17th and 18th of this month. The only question is how much?
Barring the consistent interference of the Western powers, that are unhappy with India’s growth and stature in the world, through their stooges in India, the scenario is fairly good. Crude Oil prices are down 21% f from their calendar year highs. The Monsoon is 8% above normal. Morgan Stanley has reported that India’s weight in their proprietary MSCI Emerging Market Investible Market Index has surpassed that of China.
No need to panic but it will pay to be a trader.
(V K Sharma is a market veteran with 35 years of capital market experience. He retired from HDFC Securities as Head of PCG & Capital Market Strategy)