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This week was a nightmare, not only for the bulls but also for the government and the regulators.
RBI, Sebi and the government together tried to curtail the contagion in the market through various initiatives such as allowing OMCs to tap the ECB route to raise up to $10 billion, which will take the pressure off dollars and might help calm the currency market.
Also, a quick revamp to the ILFS board brought in confidence in the debt market, which will in a way help ease liquidity concerns.
All these initiatives will have tangible effects and the market will soon react rationally to the policy initiatives.
These are path-breaking moves, which will certainly have a long-term impact on the panic-like mood in the market.
Additionally, when everyone is talking about crude oil reaching $100 a barrel level, people seldom understand the crude oil dynamics and blindly try to call the shots.
Crude has surprisingly created a false breakout with an engulfing bear pattern amid the $100 a barrel calls, which means there is a high probability of reversal and prices are likely to cool down soon.
If WTI crude futures fall below $74, it would be a confirmation to an end of the ongoing rally.
Event of the Week
Friday's RBI move to keep interest rates unchanged and maintain status quo was surprising as the Street expected a 0.25 per cent rate hike in order to curb rupee depreciation.
The Monetary Policy Committee's stance has moved from dovish to 'calibrated tightening', which is dangerous for the currency market.
This move had an instant impact on our currency, which moved lower and crossed the Rs 74 to the dollar mark for the first time.
All markets - currencies, crude and equities - have become hyperactive, but hopefully crude will calm soon and the rest are expected to follow suit.
Technical Outlook The real chart to watch in order to understand the true state of the market is NiftySmallCap100 Index.
This index has fallen sharply to touch the lower end of the channel.
Indicators are in deeply oversold mode, which gives a ray of hope that the bottom is near and a sharp bounceback is expected any time.
Traders are advised to take selective long positions in the form of Call options to mitigate the risk of further panic selling in the market, if any.
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Expectation for the Week:The market has been witnessing selling across the board.
Even good quality stocks have been battered in line with the broader market.
However, the current fall was in isolation with global developed markets, which give a ray of hope that a bounce will emerge soon as valuations have corrected a lot across the board.
We think the market will calm down once corporate earnings start pouring in.
Given the oversold state of the market, sharp rallies can be expected.
Investors are advised to hold on to their quality stocks and mutual fund units.
SIP investors should double their SIP amounts.
The Nifty50 closed the week 5.6 per cent lower at 10,316.
Base MetalsBase metals remained positive this week, with Aluminium and Zinc rallying the most amongst the complex.
Zinc prices got support from reports that Chinese stockpiles in the Shanghai metal exchanges fell this week.
Additionally, surcharges on physical metal in Shanghai of quantity above $200/MT have hit their highest since November 2013, which has lent support to the metal prices.
A private forecaster out of China has said that refined zinc production in China has been low because of the smelter cuts.
However, the forecaster believes that demand is not very robust which may have limited further upside of the commodity.
The Alumina market still remains in a tight supply this year due to the outage at Norsk Hydro's plant in Brazil, US sanctions on Russian producer Rusal and a strike at Alcoa's AA.N alumina refineries in Australia that was resolved last week.
The market is also worried about aluminium stocks on the LME market, which at 979,800 MT have more than halved since January last year and are at their lowest since early 2008.
Meanwhile, Copper rose this week on the back of deficit expectations this year for the commodity.
The copper market should see a deficit of 92,000 MT this year and a deficit of 65,000 MT in 2019, the International Copper Study Group (ICSG) said.
Additionally, total inventories of copper in LME warehouses fell to 194,175 MT, the lowest since December.
This also supported prices.
Looking ahead, Aluminium and Zinc prices continue to move higher supported by their respective fundamentals.
With China also coming back from holidays next week, some more upside could be seen for base metals.
However, uncertainty about how metals demand will be hit by trade wars, rising US interest rates and a slowdown in China are weighing on industrial metals prices.
Domestic base metal prices remained on the higher side and ended with gains, with the exception of Lead prices.
Technically, Zinc, On the monthly chart, MCX ZINC has confirm "Bullish Hammer Candlestick Pattern" after giving a brief correction from its all-time high level, it has halted its downside move at 164 level which is 50.00 per cent Fibonacci Retracement of its previous upside move from 97 level to 232 level which indicates that the ZINC could accelerate its upward movement.
On the weekly chart, MCX ZINC is trading above its 100 Weekly Moving Average which is placed at 193 levels this suggests a positive strength in the counter if sustain above this 193 level.
On the daily chart, MCX ZINC has given breakout of "Double Bottom" formation which indicates that the bullish rally will continue for near term.
A weekly momentum indicator RSI reading is at 52.80 levels with a positive crossover as well as RSI has given a breakout of Downward Sloping Trend Line which points out for a positive breath in the counter.
Furthermore, MACD indicator on weekly basis has given positive crossover which adds more bullishness in the counter.
Based on the above technical structure, we are expecting an upside movement in the counter in few trading sessions.
Crude OilOil prices remained firm this week as investors still remained focused on US sanctions on Iran, which take effect on Nov.
4 and are designed to cut crude exports from the No.
3 producer in OPEC.
China's Sinopec Corp has reduced its loadings of crude oil from Iran by half for the month, as the state refiner comes under intense pressure from Washington to comply with a US ban on Iranian oil from November.
Reuters reported that based on the prevailing supply contract between the top Chinese refiner and the National Iranian Oil Company (NIOC), its loadings would be reduced to about 130,000 barrels per day (bpd).
This would be 20 per cent of China's average daily imports from Iran in 2017.
Markets brushed off a rise in crude oil inventories from the United States after data showed that US crude inventories jumped close to 8 million barrels last week, quadruple of analyst's expectations and the biggest build since March 2017.
Statement from Saudi Energy Minister Khalid al-Falih who said that the kingdom had increased output to 10.7 million barrels per day in October and would pump more in November were also ignored , as speculators continued to buy on any fall in the market.
Looking ahead, we believe that the markets could continue to remain tense because of the looming US sanctions against Iran's oil exports that are scheduled to start from Nov.
4.
However, we also believe that fundamental data outside of Iran has not turned bullish in our view.
United States has increased their crude production , a recent data showed that their output jumped by a third since mid-2016 to a record 11.1 million barrel per day (bpd).
Many private forecasters believe that their output will rise further to 11.3 million bpd.
IMF has warned that expensive energy could spell problems for the global economy.
We believe that the inflationary combination of higher oil costs and weakening currencies, including India's rupee, Indonesia's rupiah and the Philippine peso, could cause a global economic slowdown that would slow down oil demand in these countries.
However, the question for now remains whether the increase in production from other producers US and slowing demand may be enough to offset the supply gap left by Iran.
Domestic prices surged higher tracking firm overseas prices.
Weak Rupee also pushed prices higher.
Technically, Crude Oil, on the weekly chart, is trading in its Higher Top High Bottom channel formation has reached to its four years high level where overall sentiments remain bullish until we see a reversal pattern formation.
On the daily chart, MCX CRUDEOIL has formed a long Bearish Candlestick after retreating from its four years high level which is a sign for some correction if it starts to trade below 5450 level.
Based on above technical parameters, Alternative scenario indicates that if the key support of 5400 level holds then there is a chance that the price can reverse to its Bullish trend but if a Bearish Reversal confirms then a downside move could test to 5200 level.
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