India pre-market Oct 24th

Nifty(5049): Indian markets were locked into the range of 4720-5160 on the Nifty for the eighth consecutive week.

Nifty - weekly charts

The important take away has been that heavyweights TCS, Reliance and Larsen have formed negative candles within this range and Larsen is at the threshold of clocking a new low for the year. We also have the Indian Rupee at verge of striking the all time low it made in 2008. While a strong Rupee is not a pre-requisite for the Indian markets to rally, see the INR vs Nifty charts below the orange rectangle, blackline being rupee. Given this backdrop, the chances for Nifty to push much beyond the recent swing high is a tall order and just a small negative trigger is what is needed to tip the scales.

INRvsNifty

If you are wondering what that trigger could be: It is the Euro and the Euro zone. A quick look at the charts of the European bond markets seems to indicate that their plans are dead before arrival. While the equity markets have been rallying over the last few weeks, the 10 year bond yields of Spain, Italy have been rising. And no, this is not a risk on trade. Their yield spreads to German debt is widening. And the most telling fact is that the french spreads to the german bunds is at a 2 decade high!! Essentially, the while the European leaders are trying to sort the problem of Greece and Italy, the bond market is signalling that the crisis has arrived in France. (Sorry no charts) Watch out, the Euro has opened 0.25% lower this morning.

Nifty short term: The range of 5030-5140 might hold for the day. Any dip below 5030, is likely to take this market to 4970.