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Last week's data release, US-China Trade talks, current week outlook (NIFTY, BANKNIFTY)

Key points for trading the Indian Markets for the week of 16th December 2019:


  • Securities market rallied higher despite poor economic performance data that was released later in the week ending 13th December 2019, suggesting that market is ignoring news

  • #India Market is likely to test all time high early in the week starting 16th December

  • Given reduced activity during December, it is possible that major Indian indices will move sideways until end of this month, staying within range 11800 – 12200, unless some strong fundamental news moves the market

#NIFTY stock index, in the first two days of the week ending 13th December 2019, briefly broke below the support area at 11880, but held its nerve above 11800. In the following three days, NIFTY stock index rallied with gaps, coming close to all time high of 12159 (seen earlier this year on 28th November). The possible reason could be the further progression in US - China trade deal talks held last Friday. Details of the phase I of US - China can be found here: What the interim US-China trade deal means -- and doesn't.

Global Markets and specifically Asian Markets seek further details of the US-China trade deal and appear tepid as the Monday trading begins.


Fundamental Analysis and Economic Data Release During the Prior Week


There were fundamental economic releases last week, but in general securities market has ignored them. The data published on Thursday: #India Inflation during November at 5.54%, up from 4.62% during previous month. Same report also stated that Industrial Production in October 2019 declined by 3.8% compared to same period in 2018, while Manufacturing Output declined by 2.1%. However both these numbers were found to be better than what the market had expected (-6% and -4.8% respectively). Thinking that the bad news is not as bad as it was expected, NIFTY stock index rallied on the Friday with another gap.


DAILY PRICE CHART FOR NIFTY STOCK INDEX

Similarly, #BANKNIFTY stock index also rallied showing similar price action. Many public sector and private banks rallied during the same period. With this price action, the double top formation that was identified last week (Trading Weekly Outlook India Markets – 09-Dec-2019), stands violated. However, like NIFTY stock index, we believe that the market may move sideways until end of the month if BANKNIFTY stock index fails to break above the prior high with volume.


DAILY PRICE CHART FOR BANKNIFTY STOCK INDEX


What Next For India Securities Markets?


As we get into the second half of December, we can expect reduced trading volumes. Wholesale Price Data will be released on Monday, 16th December 2019, in the afternoon which can move the stock markets somewhat. However, we believe it is unlikely to take the market to new highs thereby having any significant impact on the price action. For a sustainable rally fresh new trading volume is needed, without which the market will drift sideways for remaining two weeks, of the impending holiday season.