Infosys, US data will dictate market mood

Infosys, US data will dictate market mood
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First Published: Sun, Apr 08 2007. 11 59 PM IST
Updated: Sun, Apr 08 2007. 11 59 PM IST
After a disastrous start to the week, equities bounced back, but still ended lower for the full week as investors remained wary of monetary tightening measures adopted by the central bank the previous week.
Inflation, which has really spelled trouble on the bourses, now seems to be peaking, and hence, it is not likely to create the kind of ripples it has in recent months. Now, corporate earnings for the fourth quarter and revenue guidance for the next year are going to take the centrestage, and a lot of action is promised in the next few weeks.
Especially in a situation when the rupee has strengthened considerably, the revenue guidance of software companies would be watched very carefully. Software companies have already hinted that they may absorb the current rupee shock, but any further slide of the dollar against the Indian currency might hurt their margins.
The suspense would be finally over on 13 April, with the announcement of Infosys Technologies Ltd’s numbers.
These results will actually be the next big trigger and the market is hoping—and if Infosys is able to offer some surprises—it can change the mood on the bourses.
The word trigger does not mean that this will signal a fresh, long rally. What it means is that it may be enough to kill the negative sentiments, which are dogging the bourses for some time now.
Even if Infosys announces bumper earnings and rosy revenue guidance for the next financial year, it can bring in a short sharp rally and the sentiments would turn cautious again to hear from other index (Sensex) majors on their corporate earnings.
Globally also, the earnings season has just begun. However, more importantly, the US-March employment data will decide the trend on global bourses and this is really going to be critical for leading stock exchanges, as they have rallied considerably ignoring US economic indicators.
Last week, Morgan Stanley Capital International Inc.’s broadest index of shares outside Japan hit a record on 4 April, with several key Asian markets such as China, Singapore, South Korea and Australia recently hitting their all-time highs. The rally, though, was triggered by lower oil prices, but the weight of the US economy is significant enough to create fresh ripples on global bourses.
Looking forward this week, despite the cautious undertone on bourses, the market is likely to inch up further. But the pressure of US data would be on Indian bourses as well, as any negative surprises on that count could mean more trouble for domestic bourses also.
Technically speaking, the market is looking better than last week, but low volumes clearly indicate that the sentiments on bourses are very cautious.
For the rising Sensex, the first resistance is likely to come up at 13,076 points. However, this is a moderate resistance, and if the index crosses this, then the next resistance is likely to come up at 13,287 points.
If this is also breached, then the rising Sensex could confront a crucial and a major resistance at 13,414 points, which would decide the trend on the bourses. If this level is broken, then the bulls will be in charge and the markets could see rally on the bourses.
On its way down, the Sensex is likely to test its first support at 12,686 points, following which the next support is placed at 12,432 points. This is though a good support, but if this is broken, then the benchmark index could test its very strong support at 12,212 points, which could decide the trend for the coming weeks.
Individual stocks
This week, ABB Ltd, Mahindra & Mahindra Ltd (M&M) and Larsen & Toubro Ltd (L&T) look good on the charts. L&T is in a consolidation phase and has resistance at Rs1,570, following which there could be a rally of up to Rs 70. However, on the downside, the stock has strong support at Rs1,490. It was last traded at Rs1,547.65.
ABB is another good stock from a charts perspective, with a good upward potential. The stock can witness a good upward swing once its crosses Rs3,700. However, on the downside, the stock , which last traded at Rs3,583.95, has rock-solid support at Rs3,400. M&M is bottoming out and offers good scope for appreciation in the coming days. The stock has a strong support at Rs682 and on the upside, has the potential to cross Rs800. It last traded at Rs713.60.
From the last week’s picks, Tata Power Company Ltd and Reliance Energy Ltd gained over their previous week’s close, while Bharti Airtel Ltd and Hero Honda Motors Ltd ended in the red.
Vipul Verma is a Delhi-based, independent investment adviser. Your comments, questions and reactions to this column are welcome at ticker@livemint.com.
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First Published: Sun, Apr 08 2007. 11 59 PM IST
More Topics: Money Matters | Equities |