Street to keep an eye on Fed moves

The 50-share Nifty eroded all the gains of week in just a single day on Friday and ended 0.48% lower at 10754 on weekly basis. However, the mid and small cap indices outperformed by gains of 0.64% and 1.56% respectively.

The mixed performance was seen across the sectoral indices. The PSU Banks (+1.84%), Metals(+1.60%), Auto, Pharma and Energy sector ended with gains while Information Technology (-4.33%) and Media (-3.76%) and FMCG were among draggers.

The foreign institutional investors (FII) bought equities worth Rs 1,048 crore while the domestic institutional investors (DII) were sellers to the tune of Rs 11,41crore.

The key highlights of last week include, the newly elected chief minister of Madhya Pradesh and Rajasthan cleared the proposal of waiving farm loans up to Rs 2 lakh totalling Rs 53,000 crore as promised ahead of assembly polls. The government proposed capital infusion of Rs 41,000 crore for ailing the PSU banks in addition to earlier budgeted Rs 65,000 crore, thus taking total to Rs 1.06 lakh crore for FY19. This capital infusion is to help decent performing prompt corrective action (PCA) banks to come out of the PCA framework without relaxing its norms.

The Reserve Bank of India (RBI) announced to buy government bonds via open market operations (OMO) worth Rs 50,000 crore in January month to provide liquidity. The US Federal Reserve further raised interest rates by 25 bps as expected, but forecast only two rate hikes in 2019 and signalled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.

Last week, indices rose for the first three days with RBIs OMO purchase, recapitalisation news, falling crude prices from $61 to $53 (down 13%) in just one week and stronger rupee which ended at 70.14 which got overshadowed with fears of a slowdown in US and China.

The lesser dovish stance by the US Fed and partial US government shutdown spooked investors across the globe which turned out to be "Black Friday" on the D-Street. The broader Nifty lost 198 points in a single day. The oil marketing companies (OMC) were gainers for the week ahead of fall in crude prices while Infosys, TCS and Wipro were the losers as headwinds of the global slowdown and a stronger rupee.

Worldwide financial markets are closed tomorrow on Christmas Day celebration. There is no big important event globally this week. However, any further development on the trade war may prompt volatility in the market. Also, investors will keep an eye on the ongoing spat with Fed officials or issues of the government shutdown.

Last week, Nifty traded in the range of 10985-10738. It reacted down exactly from the higher end of my predefined range of 10600-10940. Technically, the 50-share index closed below its 200 day SMA and 200 days EMA is placed at 10700. Nifty support levels at 10700-10650-10560-10470 while resistance level at 10820-10880-10980. The probable trading range for Nifty could be between 10560-10980 for the week.

VOLATILITY AHEAD

• Technically, Nifty closed below its 200 day SMA and 200 day EMA is placed at 10700
   
• Investors will keep an eye on the ongoing spat with Fed officials or issues of government shutdown and trade war development

The writer is VP-retail research, Motilal Oswal Financial Services