After weeks of uncertainty, key indices and stocks prices bounced back mainly on firm global markets and positive news flow. This despite the fact that the most sought after event of last week, the demerger plans of auto major, Bajaj Auto Ltd, was a dampener and sharp fall in the stock restricted gains in key indices.
However, positive economic data, including lower inflation, added to the positive sentiments on bourses. From the earnings point of view also, the week was quite satisfactory as index majors such as Tata Motors Ltd, Tata Steel Ltd, and Dr Reddy’s Laboratories Ltd reported better-than-expected earnings and cheered the market.
However, global factors, especially news from China, kept some pressure on key Asian bourses and that had its impact on Indian bourses too.
This week, global markets will eagerly look for developments in international crude prices, which are headed north. In the last week, Brent crude in London settled at $69.59 a barrel. In New York, US crude for June delivery settled at $64.94 a barrel, raising concerns that rising oil prices can unsettle the equity markets.
Looking at it from an Indian perspective, the impact of oil prices will not be immediate as a sustained rally in oil may dampen the sentiment in the economy.
But the movement of the rupee this week will also be watched carefully as it is headed again toward nine-year highs. If the rupee strengthens further, it would mean some fall in technology stocks as they get a majority of their income in dollars.
Among other factors, the progress of monsoon will also be watched carefully and a scheduled movement of monsoon is likely to cheer sentiment.
As far as inflation numbers are concerned, the figure has already reached the comfort zone of 5-5.5% and statements from the Prime Minister and finance minister only ensure that the bias will continue to remain towards a downward trend, and hence, the concerns over interest rates hike should ease further, which again should further boost the sentiments.
Indian bourses may continue to take some cues from global economies, especially the US, which will report the Federal Reserve Bank’s manufacturing index on Tuesday (22 May), initial jobless claims, durable goods orders and new home sales on Thursday, followed by existing home sales on Friday.
The data related to initial jobless claims would be the most critical one as the case for a materially slower economy rests on a further slowing in consumer spending.
On the whole, the mood on the bourses remains bullish and equities are likely to post further gains during the initial part of the week. However, later in the week, markets may take cues from global bourses and act in synch with them.
Since there is no other big domestic economic data due this week, the focus would be on news-based individual stocks.
So, it would be better to track individual stocks rather than looking at the market in aggregate.
Technically, there are some good bets available on bourses which may offer decent return.
The first one is Larsen & Toubro Ltd. The stock, trading at Rs1,727 is currently in a consolidation phase and on its breakout on the positive side can move up to Rs1,790. The stock has its stop loss at Rs1,660. Mahindra & Mahindra Ltd, at Rs732, is also looking bullish on charts and has a short-term target of Rs755 with a stop loss of Rs699. Another technically bullish stock is Mphasis Ltd, which is currently trading at Rs318. It has a potential to move up to Rs340 with a stop loss of Rs297.
From our last week’s technical picks, all four stocks did very well.
ICICI Bank Ltd, which was recommended at Rs848, touched a high of Rs955 during the week, registering a gain of Rs107 or 12.62%. Titian Industries Ltd also had a great run on the bourses. The stock, which was recommended at Rs997.80, touched a high of Rs1,128.5, gaining Rs130.7 or 13.1% during the week.
Tata Motors Ltd, recommended at Rs716, touched a high of Rs757, just above our target of Rs753. HCL Technologies Ltd, which was our fourth technical bet, also crossed the target and touched a high of Rs355 during the week gaining 7.22%. The stock was one of the best performing software stocks of the week.
Vipul Verma is a Delhi-based investment adviser. Your comments, questions and reactions to this column are welcome at firstname.lastname@example.org.