There was a positive surprise for the Indian investors last week who expected a narrow subdued trade for the week because of the two intervening holidays and ongoing election season. Profit shown by Citibank (unexpectedly) and its chairman’s assertion that the bank would no more require government assistance spurred the sentiments of the global markets. Our markets also happily participated in the global rally. Now, we have wait and see whether this rise will turn into a bigger “Bear Rally” taking Sensex to 10000 plus levels.
Though IIP (Industrial Production) numbers (-0.50%) were negative, markets took them as positive as the expectations were still worse. Similarly, inflation falling to multi-year low levels raised fresh hopes of another round of rate cuts by RBI.
Traders who were shorting the market till then caught unaware by the sudden upsurge of the market and started covering their short positions in a hurry, which resulted in further rise in the indices.
FIIs turning to be the net buyers and the breadth (Advance–Decline Ratio) being positive were the highlights of the week. However, trade volumes were much lower which is cause of concern.
Index majors such as Reliance, ICICI Bank and SBI led the rally. Stocks from the beaten down sectors such as Real Estate, Banks and Metals gained in a big way. Auto sector also went up because of their better show of sales numbers. Sizeable order for heavy vehicles from government helped Ashok Leyland and Tata Motors to post significant gains. Sale of shares (personal holding) by one of the top executives of Bharti Airtel impacted its shares negatively.
Dollar weakened against other major currencies including Indian Rupee because of fresh hopes of revival of economy. Similarly, Crude prices went up because of the fresh hopes of higher demand for oil arising due to the increased government expenditure under their stimulus packages.
Volatility indices like CBOE Vix and Indian Vix fell sharply giving the hopes of a stable markets in the coming week. It will be quite interesting to see whether bulls can come out of the bear-grip next week and take the Nifty to 3000 levels (Sensex 10000 points).
Last week, Nifty has closed at the strong resistance levels and it has to cross these levels (2730 points) to move towards 2810 points breaking which towards 3050 points. If, Nifty fails to cross the said levels, we may witness another round sell-off dragging the Nifty down to 2500 points once again.
Traders may initiate long position in case Nifty breaks 2730 levels firmly in Monday’s early trade, however with a strict loss limit of 2670 points. 2550-2600 points appear to be a strong support for the market. PSU Banks look attractive as majority of negative news flows have been factored in.
Indian Rupee may strengthen against US Dollar depending on the further rise in the global markets. However, it will be quite difficult for it to break 50 mark.
As of now it appears that the markets may be cautiously bullish and look for further direction from US markets. Bulls have to keep in mind that the “Bear Rally” cannot last for a longer duration unless there is a major turnaround in the global economy.
Wishing you a happy week ahead.
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