Sunday, February 8, 2009

Break out is possible?

Our market has been hovering in a narrow range of 200 points (Nifty) for many days now. Second stimulus package to be approved by US Senate and the Interim Budget to be presented in Indian Parliament in the coming week are expected to take the market beyond the range upwards.

Week that was

Worse than expected US GDP data resulted in a negative opening for our market. With the corporate results were almost over, the traders were clueless on the future direction for the Nifty. Hence, market was stuck in a narrow range. Trading volumes dried up. As expected, Nifty took a strong support at the levels around 2750 points.

Sudden spurt in inflation in the previous two weeks surprised many market pundits dampening the rate cut hopes. Stocks from Interest rate sensitive sectors like Auto, Banking and Realty were sold off. Worse than expected results from DLF affected the realty counters further. There was also profit booking in the counters, which rose significantly in the previous week. FIIs sold last week in cash market however in a small way.

At the same time, cement counters were shining because of better than expected consignments. Interim judgment on KG gas favoring Reliance Industries Ltd helped the index major to post gains for the week. Nifty and Sensex ended the week with marginal loses and the breadth of the market was negative.

Week Ahead

Inflation resuming the falling trend and the announcement by RBI head brought back the hopes of another round of rate cuts. As said earlier, US stimulus package brought huge expectations from the markets across the globe. Similarly, interim budget due to be submitted in the coming week will be closely monitored by the market. There are expectations of stimulus measures in the interim budget to revive the economy. There are market expectations that the Nifty range (2700-2900) will be broken this week upwards and the next targets for Nifty are 3050 and 3200 points. At the same time, market may continue to be volatile. Traders may take long positions in Nifty and largecap stocks however with a strict stop loss limit of 2750 points.

With the emerging markets posting gains for the second week in a row, Dollar is expected to weaken against the emerging currencies. Base metals and crude may strengthen based on the US stimulus measures. Gold may weaken in case the stock markets do well.

Wish you a happy week ahead.

Disclaimer: This is only for information and not a recommendation to buy any stocks. Investments in shares are subject to market risks and investments should be on own risk.

Sunday, February 1, 2009

Positive Surprise

Last week, our market surprised many pundits by its sharp pull back ignoring many negative factors such as poor results from corporate world, resurfacing of inflationary concerns, no rate cuts by RBI, looming economic recessionary concerns and Satyam Issue. The sharp pull back was triggered by a positive surprise in US homesales data. Traders returning after a longer weekend were caught unaware of this development had to square their short position in a hurry leading to a sharp bounce back particularly in the largecap indices which is evident from the fact the beaten down sectors (Metals, Realty and Banking) of the last F&O series were the major gainers for the last week.

Positive global cues (barring US markets), return of FIIs though in small numbers and heavy investment by Mutual Funds helped in sustaining the pull back and crossing the crucial fifty days moving average of 2850 (Nifty)levels. At the same time, the rally was not a broad based one and the small and midcap stocks under performed their largecap peers. Inflation moved marginally up to touch 5.64% and was largely unnoticed by the market. As we have been mentioning in the earlier posts, the range around 2700 points stood as a firm support for Nifty.

Week Ahead

US economy has contracted worse than expectations as per the data published therein on Friday, which may drag our markets down in the opening trade of the coming week. Our market will also look for cues from other Asian peers. However, there are expectations that our market will have a bounce back after an initial fall as the underlying sentiments have turned mildly positive because of the last week’s developments. Further, there are reports of fresh addition of long position in the new F&O series, which may help sustaining the pull back rally. The pull back may even take the Nifty to 3050 levels but 2880-2900 levels may act as a stiff resistance. Traders may accumulate Nifty futures and major stocks such as Reliance, SBI and ONGC around 2800 levels with a stop loss limit around 2750 and 2660 levels. At the same time, in case of further bad news, if any, from US/Europe may drag the market below 2800 levels, which is negative in the medium term. Trading View on few stocks is given below.

Stock Target 1 Target 2 Support 1 Support 2

Reliance 1375 1430 1215 1110
SBI 1188 1227 1084 1018
ONGC 675 698 624 580

Wish you a happy week ahead.

Disclaimer: This is only for information and not a recommendation to buy any stocks. Investments in shares are subject to market risks and investments should be on own risk.