Red October in Stock Market

Nifty managed to open positive, bouncing from its next
crucial support of 4750 and with the help of positive global
cues, but did not sustain at higher levels. Finally in the
second half, 4750 was broken and as expected the selloff
then was sharp.

October is conventionally known as a
month of correction in the stock markets globally. Black
Monday refers to Monday, October 19, 1987, when stock
markets around the world crashed, shedding a huge value
in a very short time. The Black Monday decline was the
largest one-day percentage decline in the stock markets’
history and there are several other occasions when such
events have happened in October. One such instance is
October 2008. The history repeats itself and the same
happened this year in 2009, though at a milder scale.

The benchmark index gave a monthly negative close, which
further signals that the downtrend which started in this
month has still more to go on the lower side. So, we
continue to maintain our short and medium term bias
down, as the wave patterns and momentum both signals
a more downside.

On the daily chart, Nifty is trading below its 20 daily
moving average (DMA) and 40DMA at 4992 and 4925
respectively, which are resistances in the near term. The
momentum indicator (KST) has given negative crossover
and is below the zero line. The market breadth was
negative with 487 advances and 777 declines on the NSE
and 1,069 advances and 1,740 declines on the BSE.
On the hourly chart, Nifty is trading below its 20 hourly
moving average (HMA) and 40HMA at 4800 and 4894
respectively, which are now resistances in the short term.

The momentum indicator (KST) has given a negative
crossover and is trading below the zero line.
Nifty and the Sensex shed 39 and 156 points each. Of the
30 stocks of the Sensex Grasim Industries (up 2.22%) and
Tata Motors (up 1.80%) are the top gainers, while Bharti
Airtel (down 6.38%) and Reliance Communications (down
7.37%) were the top losers.