After an extended bearish spell, equities finally looked up on fresh buying by funds and traders as the stock market came out of the woods on a string of positive news flow.
The first trigger came in the form of positive US employment data, which led to a sharp rally on the bourses. Later in the week, sentiments got a further boost by better-than-expected Infosys Technologies Ltd, results and lowerthan-expected inflation numbers at 5.74% for the week ended 31 March.
The decline in the inflation numbers was primarily due to a favourable base effect rather than the Reserve Bank of India’s (RBI) money tightening measures to tame inflation, thus making it a purely statistical phenomenon. The inflation debate still continues, centred on whether RBI will go ahead with yet another rate hike in its forthcoming policy review meeting on 24 April.
However, at this point of time, it appears that the market has ignored all the fears on inflation and does not seem too bothered about the rate hike, because, even if it happens, it would probably be the last for some time to come.
Meanwhile, the early corporate earnings performance so far has been impressive, and there are hopes of even more positive surprises in the coming weeks.
This week, the market is likely to resume on positive notes tracking gains on the US bourses in weekend trading, as fears about inflation and higher interest rates eased after the US government data showed that producer prices, excluding food and energy, remained unchanged in March. Moreover, positive earnings news also helped the US stocks. Drug maker Merck & Co. lifted its outlook for first-quarter and full-year profits, while General Electric Co. reported a rise in profit.
Clearly the decisive factor for markets across the globe at this point of time will be earnings even though, this week, some critical US data is also due, which can also have an impact on global bourses.
On Monday, data related to March retail sales will be released, while on Tuesday all eyes would be set on the US consumer prices index, housing starts, and the industrial production. All these data are very important, as it would give the necessary clue about the inflation and interest rates, which could influence the global bourses.
Back home, this week, some crucial results are due, including from TCS, Wipro, HCL, UTI Bank, ACC, Gujarat Ambuja Cements, IDBI, India Cements and Zee Entertainment etc. Especially, the results of TCS, Wipro and UTI Bank will be watched carefully. If these numbers fare well against market expectations, then there could be more gains on bourses.
Technically, the Bombay Stock Exchange’s Sensex is very close to its strong resistance of 13,442 points. If on its way north, Sensex closes above this level, then this would significantly improve the sentiment and would signal more gains on bourses as the next resistance for the rising Sensex is placed at 13,896 points. This too is not a very strong resistance as Sensex, on crossing this resistance level, may target the level of 14,183 points. On its way down, there is good support now at 13,093 points, following this, the next support level is placed at 12,622 points and then at 12,376 points.
Lanco Infrastructure Ltd, IVRCL Infrastructures and Projects Ltd, and Housing Development Finance Corp.are on this week’s technical radar.
Lanco Infrastructure is currently trading at Rs151 and has a potential to move up to Rs164 in the short term, simply based on technicals. The stocks has a solid bottom at Rs139.
IVRCL currently trades at Rs276 and has the potential to move up to Rs299 in the short term. However, the stock has a strong support at Rs257.
HDFC is a good medium-term buy and is currently available at Rs1,563. In the short-term, the stock can move up to Rs1,617, whereas in the medium term, one can expect a target of Rs1,700. On the downside, the stock has a good support at Rs1,494.
Last week, the stocks mentioned in the column for their technical strength ended up doing quite well. ABB Ltd gained roughly Rs162 from its previous week’s close of Rs1,583 and still has the potential to move up further based on technical analysis.
Larsen & Toubro Ltd met its targeted gain of Rs70 very easily, while Mahindra and Mahindra Ltd gained Rs32 over its previous week’s close, and at Rs744.60 it is still a buy, again based purely on technicals, with a target of Rs800.
Vipul Verma is a Delhi-based investment advisor. Your comments, questions and reactions to this weekly column are welcome at firstname.lastname@example.org