Wednesday, 13 December 2017

THE WEEK THAT WAS 4.12.2017 – 8.12.2017

Article by : Prof. Tamal Dutta Chaudhuri, Principal, Calcutta Business School
The week saw the Sensex gain some lost ground. Although the levels are higher than the predicted level by the long run regression, it is just about at the short run regression line (Figure 1). From Figure 2 we can observe that the market fell after the double top,(A), but regained and formed a double bottom (B). It has crossed the first Fibonacci resistance, but there are two more to go. My feeling is that the market will find it difficult to reach 33700 levels right away. Some news relating to capitalization of banks has created waves, but t is not sustainable. We have to await third quarter results for some fundamental shift. Although RSI has regained a bit (Figure 3), momentum is weak.

Figure 1

Figure 4 provides an interesting insight. Conceptually, when oil prices rise, the Indian rupee should depreciate against the US Dollar as demand for dollars would rise. This can be seen in Phase A in Figure 4. Red line is Crude Oil 1 month futures and Blue Line is Rupee to the US Dollar. However, in Phase B this is not clearly observed. Some increased confidence in the Indian economy has been perceived which has led to increased dollar inflow into India. Thus, in spite of crude oil prices hardening, the rupee has to some extent appreciated.

Figure 2

Figure 3

Figure 4

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