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.