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India Markets 13-Jan-2020: Market ignores Iran fears

Key points for the week (NIFTY / India Markets):

  • The market ignored the Iran news by end of last week, posting new all-time high for NIFTY

  • There was improvement in fundamental data – the Industrial Production returned to growth after three months of shrinking

Per our expectation, the market continued to move higher during the week, ignoring possibility of any conflict between US and Iran following the assassination of Iranian General by USA. NIFTY, which is in solid upward trend, had a strong pullback in the first two days, but in the second half it rallied with strength, gapping up significantly and continuing to move higher. The area near 11930 proved important to provide the needed push to NIFTY to rise higher to post new all time low, with the market closing close to the weekly high. At the close of the week, NIFTY was inside the supply area between 12200 – 12300.



DAILY PRICE CHART NIFTY 50 INDEX

In bigger picture NIFTY is in upward ascending channel since start of 2016, and is in upswing after testing the bottom of the channel in September 2019. In that chart, we see the price action forming a bullish pin-bar candle, suggesting that bulls are still strong.


WEEKLY PRICE CHART NIFTY 50 INDEX

The long tail suggests that though there was a downward thrust by bears earlier in the week, they were defeated by the bulls who want to take the market higher.


BANKNIFTY is showing similar picture, with a rally to post a new high. Though it did not post a new high, it tested the supply area.



DAILY PRICE CHART BANKNIFTY 50 INDEX

In bigger picture, BANKNIFTY is also in a parallel ascending channel, and also has posted a similar pin-bar, confirming bullish bias.


DAILY PRICE CHART BANKNIFTY 50 INDEX

FUNDAMENTAL ANALYSIS AND ECONOMIC DATA RELEASES


Finally – the production output numbers were much encouraging for November. Industrial production for November 2019 grew by 1.8% while Manufacturing production increased by 2.7%. Both these numbers are YoY, i.e. compared with the respective output for the same month in previous year. This is certainly encouraging, given Indian industry experienced three consecutive months of negative growth over same period in previous year. While the weekend would reduce impact of the news on new week’s trading, we expect some positive sentiment in the market at the start.



OUTLOOK AHEAD FOR INDIA MARKETS


The market is expected to continue the move up. BANKNIFTY, still being below previous high, would need a little more push from the bulls. Once it breaks higher, NIFTY will rally even stronger.


However if NIFTY drops below 11930 pivot – that would be taken as a significant structural failure, and would lead the market to lower area of demand at 11490 – 11660.