See muted flows & stock specific week on D-Street: Udayan

After a very poor close on Friday when Nifty got knocked back to almost 5900, the market has started what is arguably one of the biggest earnings week. A lot of big index companies are reporting this week. The index has been struggling but this week could likely be a very stock specific week. This is in the absence of any major global cues with most of Asian markets shut because of Chinese New Year. 

The Friday close was very disheartening, because Nifty was trying its best to get to that 6000 level and hold on to that 5950 support. However, it gave way on Friday.

Now the market has to come below the important support levels that it was trying to cling on to. I expect the bears starting the week on a slightly more confident note than the bulls given the kind of closing that we saw on Friday.
However, it is a big earnings week and there are big numbers like Tata Motors, Tata Steel, State Bank of India and all the big PSU oil companies - ONGC and OMCs. Given that it is such a big earnings week and the fact that we won't have too many global triggers for the next few days, it is likely that it becomes one of those very heavy earnings reactions where the Nifty still manages to float in a bit of a range albeit a lower range around closer to 5900. Depending on the outcome of those results, we will get some clarity by the end of this week. So, don't expect it to be a big index week as such, despite the weakness last week but maybe more stock specific.
Hong Kong, Singapore and China are shut over the next couple of days, so it will be interesting to see what flows are like this week. So, maybe a lot of investors who participated in India may not be very active. It is possible that we do not get very smart flows atleast for the first two-three sessions like we have got used to over the last many weeks. I don’t see very smart flows for the first two-three sessions. It would be interesting to see how the market negotiates this period of some absence of participation  from the investors who have held the market up thus far.
The numbers from the global side remain quite staggering in terms of flows, but this week might be a slightly more muted one. It is all the more reason for the index to just be in a range and soak in the stock specific information.
The index is grinding lower despite very strong flows and that's quite disturbing because year to date, we have got USD 7 billion of FII flows and the index has not gone anywhere. That's a bit unusual to see at the best of times. So, the Nifty is in a bad place.
Now whether Friday signalled a breakdown from the trading range below the level of 5920-5930 or it is still too close to call and still hanging in there with a chance of rebounding, that is difficult to tell. However, I think the bears will probably try and push their advantage today sometime during the course of this week to assure or to force a complete breakdown in the index below that 5900 level.
There are signs that the market is breaking down, particularly the way the broader market has been moving. The Nifty has so far been holding out, but because of the spate of issuances which are coming in, I think now that tiredness is far more visible. So, if for some reason for the Chinese New Year or any other reason global flows slow down in the next couple days or two-three sessions, it is possible that with that support being lower, the market might actually breakdown below that 5900 level conclusively.
If that happens, one will probably see short activity picking up in the market but one should maybe wait for another day to get confirmation of this breakdown because we just got a little bit of a pull back in the dying moments to pull the index back above 5900. However, there are a lot of important results which might tilt this scale one way or the other this week. I guess after Friday, we would have to say that the probability of a breakdown has increased.