EOD Analysis for 25th November 2011 and Outlook for 26th November 2011

As expected, the OI in Nifty futures dropped by almost 30% 1 day after expiry and significant premium shrinkage in Nifty futures came in. Choppy action through out as markets are still undecisive. We had a poke below 4700 again but things seemed just about ok at close with BNF showing some resilience with a flat close. I am inclined to believe that this is due to short-covering and some profit booking from the highs of the day as very few people would like to carry risks overnight.

Looking at the way FTSE, DAX and Euro-Dollar are crumbling, I am inclined to believe that another leg of steep fall is awaiting Nifty and the low of 4640 in all likelihood will be retested again. If it holds, well and good otherwise the carnage can continue to 4450-4550 in all likelihood will finally get arrested hopefully.

For December, weakness is expected to continue with 5th December and 16th December being most crucial dates. From 16th-21st December, we are expecting a base effect to take place in Nifty and then march upwards; As of now can't see upside beyond 4994 but if bulls manage to take out the 5092-5125 levels for 2 consecutive sessions then further upside can be expected.

As mentioned in Raghuji's blog, the markets might play in a tight range for a few days but here I have a slight disagreement [as we keep saying, there is enough latitude amongst our team members to have divergent opinions and that neither hampers our relationship nor stops us from learning from each other]

In all likelihood 4600 will be broken this time is my stance [supported by astrological views from garikaptiji i.e. Sarmaji]

For global markets, expecting a relief rally on FTSE [from 5k-5050 levels with eventual targets being 4800-4900] and DAX from 5250-5350 levels with eventual targets being sub-5k levels. Euro-Dollar has hit our target and should find an interim bottom at 1.3-1.3225 levels from where some short-covering can be expected. Eventual destinations are 1.3 and 1.28 but in due course of time; there is no perpetual rise or fall. GBP-Dollar has also gone below 1.56 as indicated last week and hence the stability in BNF looks very illusory. Some more pain of 250-300 points expected here.

IT companies can book one time profits on forex but the real concern is growth and with the current economic conditions, it is very clear that the order book is going to shrink for next year and this will be the main concern for IT segment. INFY 3 times in a row has managed to stay afloat 2600 levels but if this level is repeatedly pounded, has potential to go down another 100-125 odd points. HDFC can slip to 575-580 levels if 605-608 levels don't hold firm on closing basis. Only 2 closes above 2650 [for Infy] and above 625 [for HDFC] can bring some relief on these counters.

For Nifty, volumes have to go up and minimum OI of 30-32 million required to gain 150 points from here - lack of volumes can only delay the fall but not prevent it.

Dow can correct another 200-250 points from here but there is too much bearishness now; should see some short-covering from 11k-11100 levels

All markets have been covered and hence no special updates will be made over the weekend. Dow section will be updated tomorrow morning. Hope you had a profitable week and hope all of you manage to enjoy your weekend.