CAUTION ADVISED ON ACCOUNT OF NEGATIVE DIVERGENCE

CAUTION ADVISED ON ACCOUNT OF NEGATIVE DIVERGENCE

WORLD MARKETS                             

US indices ended little changed on Friday.

October retail sales rose 0.3%, just above expectations, along with a jump in consumer confidence in November. Another report had U.S. import prices falling in September the most in two years as the cost of petroleum products fell and a stronger dollar made it cheaper for Americans to buy goods from abroad.

European markets ended flat to modestly higher amidst better-than-expected growth data which showed that the euro zone economy expanded by 0.2% in the third quarter. Germany narrowly missed falling into recession, while French growth beat forecasts. In Greece, revised figures showed that the country had emerged from a six-year recession. Italy, however, remained stuck in a negative growth trend in the last quarter.

A fresh inflation figure for the whole euro zone confirmed that consumer prices ticked higher by 0.4% in October, compared to the same period last year.

Nymex crude climbed $1.6 to $75.8 a barrel; Gold rose $24 to $1586 an ounce.

For the week, Dow and S & P 500 gained 0.4% each while Nasdaq surged 1.2%. Europe was mixed with FTSE and CAC rising around 1.3% and 0.3% respectively. Germany and Italy lost 0.4% and 0.7% respectively.

AT HOME

Benchmark indices ended higher by four tenth of a percent after a choppy trading session, with both the benchmark indices closing at record highs. Sensex gained 106 points to settle at 28047 while Nifty finished at 8390, up 32 points. BSE mid-cap and small-cap indices gained half a percent each. Except a 1.2% and 0.1% cut in BSE Healthcare and FMCG indices respectively, all the BSE sectoral indices ended in green with Metal and Realty indices leading the tally, putting on 2.5% and 2.4% respectively.

FIIs net bought stocks and stock futures worth Rs 646 cr and 98 cr respectively but net sold index futures worth Rs 208 cr. DIIs were net sellers to the tune of Rs 518 cr.

Rupee closed at 61.72/$, depreciating 17 paise compared to previous close.

India's October WPI came in at 1.77%, the lowest since September 2009, against 2.38% on a month-on-month basis.

SBI's asset quality remained stable in the September quarter with Gross NPAs coming in at 4.89% vs 4.9% q-o-q and net NPAs at 2.73% vs 2.66%. Net profit jumped 30% to Rs 3100 cr and NII rose Rs 13274 cr.

BHEL saw net profit tumble nearly 73% to Rs 124.8 cr. on the back of lower revenues from power and industry segments.

Tata Motors reported worse-than-expected 7% dip in consolidated net profit at Rs 3291 cr impacted by higher tax expenses. Revenues rose better-than-expected 6.5% to Rs 60564 cr. Operating profit rose 19.2% to Rs 5671 cr.

ONGC missed street expectation on all counts on account of lower realisatins. Revenues fell 9% to Rs 20361 while net profit was down 10% to Rs 5445 cr.

OUTLOOK

Today morning Nikkei is down nearly 2% after the data showed that Japan's economy shrank 1.6% in the third quarter, defying expectations for a 2.1% growth. Other Asian markets are trading with modest cuts and SGX Nifty is suggesting a marginally lower start for our market.

Nifty, on Thursday, bounced back exactly from the 8320 support mentioned by us and closed at the highest level of 8390 on Friday. However, while the spot Nifty closed at the highest level, RSI on the daily chart made a lower top, which is called "negative divergence" in the technical parlance. This shows that there is less strength in the upmove this time around.

Caution is advised on account of this. The short term view however will turn negative only after higher-top higher-bottom formation on the hourly chart is broken and from that perspective, 8320-8290 region, where multiple supports are placed, would be the key support area to watch. A breach of this support zone can take benchmark to around 8180-8130 where previous tops on daily charts are placed. Existing longs can continue with the stop loss of 8290.