In today’s market wrap we will talk about the result of Cairn India and consequent action in its stock, activity in Nifty, the international market and the upcoming event which will determine the market trend for the next few days.
Starting with Nifty 50, the day was a downer. Though the index managed to close in green , up by just 14 points, it fell from its gap up opening since morning itself. Out of the 50 stocks, the advance-decline ratio was also unfavorable, with 22 stocks on the advance (higher closing) and 28 on the decline (lower closing).
The daily chart of Nifty 50 shows an upside resistance levels of 7600 and 7780. The key event to look out for is The Federal Open Market Committee (FOMC) meeting due on Wednesday which will set the pace of the market for the rest of the week.
Besides the above, two other important factors to keep in mind are: This is a truncated week, since tomorrow is a holiday for Republic Day celebrations and because of this, when we open on Wednesday, the market will have behind it two days of Global Market data to react to . Also, Thursday will be the January derivative contract expiry, hence giving us reasons to expect volatility in the days to come.
Chart of the Day
Since it is the third quarterly results season going on, let’s talk about Cairn India.
It posted a profit of merely 9cr this quarter, as opposed to the profit of 1350cr posted this time last year. This 99% drop in profits is the result of falling oil prices which eroded the margins away.
In-spite of having posted terrible results we witnessed a sharp upside movement in the stock. If we look at the chart, we will notice that there happened a high volume breakout from a 4 days consolidation pattern.
The reasoning for this opposite movement comes from the fact that the bad results of Cairn was a known secret to everyone, and hence upon the announcement of the same, the market reacted in such a way that instead of depressing the stock prices, an upward bounce was witnessed.