It was a tough week for the bulls amid uncertainties over inflation and how the government might react to that in this week’s Budget. With so many moving parts, very little news and lots of speculation, the market felt the heat from heavy selling by funds and traders.
First, it was expiry of derivative contracts, then it was inflation and then news of elections in Uttar Pradesh, all of which added to the uncertainity and therefore selling pressure. There is no doubt that inflation continues to remain a worrisome factor and despite all efforts by the government, inflation for the week ended 10 February, was pegged at 6.63%, which, while lower than expectations, wasn’t low enough to reverse the sentiment.
Adding to it were rounds of rumours of potential bad news for banking and cement sectors in the forthcoming Budget. All this resulted in a week that saw the benchmark Sensex index fall 723 points. After such turmoil, it appears that the markets are likely to witness a rebound and key indices and stock prices should move north, though tinged with caution ahead of the Budget.
It is a unique week as there is the Railway Budget on Monday, which is more or less discounted, followed by the annual economic survey on Tuesday and then the Budget on Wednesday. The economic survey could hold some surprises and pointers to what might come in the Budget.
Technically speaking, some pull back is visible on the charts, and equities may bounce back on Monday. Though caution will prevail ahead of the Budget, you may see selective buying on bourses.
Bank stocks, which were hammered badly, may see a relief rally following news that the Reserve Bank of India will resume interest payments on CRR deposits. Metals may strengthen further tracking sharp gains in the metal prices on London Metal Exchange. Crude oil, which is inching up, may put a dampner on the refinery stocks, but any news of further cut in excise duty on petroleum would be watched carefully.
In terms of supports and resistances, the Sensex on its way down may find its rock bottom in between 13,200 and 13,300 points, whereas a moderate support is also available at 13,512 points. On its way up, the Sensex would now face resistance at 13,956, this being a moderate resistance, the next resistance is placed at 14,296. However, if the Sensex closes above this level on any trading day, then the bull trend will be restored and the Sensex would then aim for the next big resistance level of 14,891 points.
To sum it up, exercise caution as it is a big news week and what comes out of the Budget will have significant impact on overall markets. But one could do some bargain hunting as last week’s declines provide a good opportunity to pick up individual stocks at reasonably attractive prices.
Vipul Verma is a Delhi-based investment advisor. Your comments, questions and reactions to this column are welcome at firstname.lastname@example.org.