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MARKET OUTLOOK FOR THE WEEK: 27-06-2016

MARKET OUTLOOK FOR THE WEEK: 27-06-2016
June 29
11:08 2016

Market was in a tight range from Monday to Thursday, even we saw mild recovery on Thursday ahead of the Brexit voting results, on expectation that UK will remain in EU.  On Friday Nifty and Sensex opened with a gap down and Sensex moved down by around 1000 points after UK voted to leave European Union.  Later in the day market recovered because of value buying at lower levels and Nifty finally closed at 8088.60.  According to the Indian Central Bank Governor there is no panic situation over Brexit and it will not impact rupee as much as feared widely.  Rupee made a low below 68 against dollar on Friday.  Many Central Banks including Britain’s Central bank authorities are also watching the situation very closely and if needed they are ready to infuse liquidity in the short term.

 

There are analyst’s who believes that nothing much will happen in the financial market in the short term because UK exit will take place post Dec. 2017, but others fear the worst to come in the short term if more EU countries go for exit. Nifty has resistances at 8186 and 8303 levels and having firm support at 7922 and 7850.  Like Dow Jones slow and steady decline can be expected.

 

There are many economic data’s are likely to come out next week ie; from India Bank loan growth and Nikki Manufacturing PMI, US market PMI, Service PMI, GDP growth Rate, US continuing jobless claims and US initial jobless claim are expected from US and from EU zone Business confidence and Consumer confidence data’s with Post Brexit Meetings, Inflation and Unemployment. It is prudent to lighten up your position until we get a firm support. In the domestic market India VIX closed 18.62%, but the volatility spill over can be expected from US to other emerging markets.  Nifty has resistances at 8186 and 8303 levels and having firm support at 7922 and 7850.

 

Due to Brexit, Yen appreciated a lot and it made a high at 99 levels against dollar and there are chances that it can even test 96.19 in the medium term.  On the other hand US Dollar index appreciated by around 2,46%, simultaneously pound dropped to the lowest since 1985.

Global CEO’s are reassessing their investment strategies and many small companies in UK may shut shops. Companies which borrowed Pound loans are likely to benefit in the short term.

 

In the case of Banking Nifty it has support at 16924 and 16745 levels and having resistances at 17703 and 18018 levels, this is the one sector which can lend support to the market in the short term. It is prudent to stay with low open positions until we get a firm support and one should take extreme caution due to high VIX. Now let us check the technical set up of Dow Jones, it has support at 17325 and 17120 levels and having resistances at 17826 and 18051.  A decisive move below 17120 can cause further sell-off, which may not happen in the extreme short term, but can happen slowly and steadily because weekly charts and daily charts are in the sell mode.

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ALEX MATHEWS

ALEX MATHEWS

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