Saturday, September 19, 2015

Weekly Review - 21.09.2015

Dear All,

The U.S. Federal Reserve kept interest rates unchanged on Thursday in a bow to worries about the global economy, financial market volatility and sluggish inflation at home, but left open the possibility of a modest policy tightening later this year.

"The outlook abroad appears to have become less certain," Yellen told a news conference after the Fed's policy-setting committee released a statement following a two-day meeting.

She added that a recent fall in U.S. stock prices and a rise in the value of the dollar already were tightening financial market conditions, which could slow U.S. economic growth regardless of what the Fed does.

"In light of the heightened uncertainty abroad ... the committee judged it appropriate to wait," Yellen said.

But the Fed maintained its bias toward a rate hike sometime this year, while lowering its long-term outlook for the economy.

Taken as a whole, the latest Fed projections of slower GDP growth, low unemployment and continuing low inflation suggest that concerns of a so-called secular stagnation may be taking root among policymakers. One policymaker even suggested a negative federal funds rate.

The Fed also forecast inflation would creep only slowly toward its 2 percent target even as unemployment dips lower than previously expected. It sees the unemployment rate hitting 4.8 percent next year and remaining at that level for as long as three years.

The Fed's projected interest rate path shifted downward, with the long-run federal funds rate now seen at 3.5 percent, compared to 3.75 percent at the last policy meeting.

Hours after US Federal Reserve chief Janet Yellen decided not to raise interest rates for now, Reserve Bank of India (RBI) Governor Raghuram Rajan sent out a strong message to those in the government and business rooting for an interest rate cut in India. True to his style, Rajan did not mince words and explained in detail why he believed sustainable growth needed a lot more than "quick fixes" such as interest rate cuts and tax giveaways to certain sectors.

Rajan said the 3.6 per cent Consumer Price Index-based retail inflation in August was largely due to the base effect, excluding which it would be around 5.5 per cent. "The differential between WPI (Wholesale Price Index) and CPI is a source of problem. We have to be careful while pursuing growth and have to make it sustainable," he added. In August, WPI-based inflation was in negative territory for a 10th straight month, at a historic low of -4.95 per cent.

Pressing his point further, the governor asked everyone to learn from the case of Brazil, an economy that was delivering impressive annual growth of around seven per cent till a few years ago but was now likely to shrink about three per cent. Brazil's central bank was "pressed to lower rates", fuelling a credit spree that overburdened customers are now struggling to pay, he said. "Brazil tried to grow too fast. They were forced to reduce credit cost. The takeaway lesson is, it is possible to grow fast with stimulus and rate cuts, only to pay the price later through high inflation," he said, adding, "Brazil might have overspent and China might have over-invested."

He also put the ball in the government's court, saying reforms (not rates) held the key to India's sustainable growth. "We have to expand the sustainable growth potential. That means continuing to implement reforms that the government and regulators have announced. That is the only way to get sustainable growth potential up."

Rajan said while fellow BRICS (Brazil, Russia, India, China and South Africa) nations were in distress, India seemed to be an "island of tranquillity".

The Fed's decision, he said, was probably driven by rising global uncertainties. "If we look around the world today, it doesn't present a pretty picture. Industrial countries are still struggling, with a few exceptions, to grow and the uncertainty about growth in the US and the world is probably what impelled the Fed to stay on hold."

He, however, maintained the stance that RBI would cut rates only when there was room to do so. "We have noted the Fed decision. Clearly, market somewhat benignly reacted, certainly towards us. What we need to do is continue doing what we are doing, which anyway is the intention, regardless of the Fed," Rajan said.

Lets go to Technicals..

>>> Nifty Daily Chart <<<

>>> Click the chart to see on full screen <<<

Its a Head and Shoulder - comes into picture again. So far the rally looks as a Pull back and price tested the Neck line. If this analysis is not wrong, expect the fall very soon.

I hope many might have trapped in shorts so far - may have exited with big loss. We have been advising long positions for last 2 weeks and made a big profit as you all know. FII's where continuously on the sell side, during the rally. But since then nifty rallied from 7540 to 8054 - means almost a 500 Points.

Now we advice caution on the long side, I expect there can be some more upmove left - as i have given on hourly chart - but market may turn negative on the downside any time soon.

>>> Nifty Hourly Chart <<<

>>> Click the chart to see on full screen <<<

Hourly chart looks like an Island Reversal - Ofcourse those who are bearish so far - now turned bullish because of this island reversal - and started giving a new high as their target.

As per above chart 8080 key resistance - if crosses then 8208 can be the next target.

>>> Bank Nifty Daily Chart <<<

>>> Click the chart to see on full screen <<<

Last week I wrote - Bank Nifty as a bhishma pitamah of entire market - How all might have witnessed how BN rallied last week and changed entire market scenario. It was a 1000 Point rally in just 4 trading days.

Above chart shows why and how the rally happened - If this chart was not wrong - BN also in H&S and feel the neck line may tested before next fall. Ofcourse still some more rally left - But stay caution once the levels get achieved.

>>> Bank Nifty Hourly Chart <<<

>>> Click the chart to see on full screen <<<

Above Hourly chart Shows - BN may fill the gap with key resistance at 17816.

>>> BAJAJ AUTO <<<

>>> Click the chart to see on full screen <<<

Highly bearish on Baja Auto. We are short from 2355, waiting for more fall. It the above chart is not wrong, Head and Shoulder may get breaks any time for a free fall. Cheers!!!

>>> Performance till 18th Sep, 2015 <<<

>>> Click the chart to see on full screen <<<

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