Nifty(5221.05): The single most important thing we are going to watch today is if Reliance can close below 855. If it does, the chances of Reliance dropping to 760’s if not a new low under 700 would gain strong currency. It was already pointed out a couple of days back how Nifty seems to have moved with Reliance in a lock-step fashion. So that would in effect negate the bullish prospects and cement the bearish case.

On Nifty, even an intraday touch of 5035 will eliminate the bullish case. If  Reliance does close below that 855 level this is probably going to be a matter of time. Watch for supports today at 5140-65. If we see a gap down nearer to this level be careful opening fresh shorts here.

As was pointed out in the technicals big picture, the INR was never in a favourable position for the bullish case. The Indian currency is very close to the 52 week low it made in October. A new low here would also add weight to the bearish case.

Meanwhile in Europe – remember we had pointed to the 2 decades wide spread for the French-German 1o year bonds? And said market was expecting an event? Now, S&P has eliminated the downgrade of France temporarily. BUT The spreads are now even wider after S&P reiterated the AAA on France. So wait for some other event.

And watch out for headlines : Spain will soon be hitting the wires. Although the debt here is not as bad as Italy, borrowing costs are going to make things bad for Spain.