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China, US and Monsoon to set markets trend

China, US and Monsoon to set markets trend
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First Published: Mon, May 14 2007. 12 26 AM IST
Stock markets ended lower in the absence of positive triggers and shed roughly 1% last week amid high intra-day volatility. Global factors and generally lowered sentiments on bourses led to profit selling even though a string of positive corporate results kept the momentum alive in selected counters.
Positive data, such as lower-than-expected inflation numbers and high industrial growth rate failed to cheer the markets as global cues weighed on market sentiment.
Indian bourses, once again, under-performed global bourses, especially Asian bourses, for yet another week as China, Hong Kong, South Korea, Australia, Singapore, Malaysia, and Indonesia all hit fresh peaks before falling towards the end of the week when US retailers reported their weakest April sales, renewing concerns about the American economy.
However, this week, Indian bourses appear to be on a better footing, despite the fact that this week too, data pertaining to the US and China will continue to dominate the sentiments.
This week, China is likely to play a major role in deciding the trend on global bourses. China’s consumer price data is due on Monday, and if there is an increase in inflation,then it could trigger a fresh round of selling in China as this would aggravate the concerns about further policy action by the central bank of China.
Previously, such apprehensions have led to a sell-off on Chinese bourses, which sent ripples on global bourses including the US. Going by this logic, the opening day on Indian bourses this week is likely to be quite volatile.
US markets, meanwhile, recovered remarkably on Friday as signs of slowing retail sales and slowing inflation encouraged a return of confidence, which was reflected by a rally of 111 points of Dow Jones. However, this week, the US will report the consumer price index for April on Tuesday and April housing starts and building permits on Wednesday. This will be important data to watch for as it may give good indications about the likely trend on US bourses, which rose for a record sixth week, touching all time highs.
On the domestic front, the corporate results of Tata Steel Ltd, Bajaj Auto Ltd, Dr Reddy’s Laboratories Ltd and Tata Motors Ltd will be watched carefully as all these companies are industry heavyweights.
Also, the progress of the monsoon, which has arrived more than a week early over the South Andaman sea, could be a major trigger. Markets will also carefully watch the movement of the rupee against the dollar and any weakness in rupee could actually trigger buying in technology stocks, which are much more sensitive to such fluctuations because of the source of their revenue.
Technically, this week looks better than the last week, as the key indices are giving some signs of bouncing back.
On the Sensex charts, there is a good resistance at 13,975 points. If the rising Sensex closes above this level, then it would mean more gains on bourses and the next resistance for rising Sensex will come at 14,133 points. If the Sensex crosses this level too, then it will be comfortably placed in bull orbit and would aim for the next resistance level of 14,383 points.
On the down side, the Sensex will find moderate support at 13,570 points, following which the next important support level for the Sensex is placed at 13,335 points. Under normal circumstances, falling Sensex should find strong support at this level.
Individual stock picks
This week on our technical radar are stocks such as ICICI Bank Ltd, Titan Industries Ltd, and Tata Motors.
ICICI Bank has bottomed out and is showing good signs of bouncing back. The stock is currently trading at Rs848.50 and has the potential to move up to Rs885 during this week with a stop loss of Rs818. Titan, at the current rate of Rs997.80, is in a consolidation phase and is likely to see a northward break out, which could push the stock to a level of Rs1,065, with a stop loss of Rs945. Tata Motors, at the closing rate of Rs716, is showing signs of bottoming out and could witness a pre-results upward swing, which could take it to Rs753, with a stop loss of Rs693. From a short-term perspective, HCL Technologies Ltd, at the closing rate of Rs330.75, may also witness a small spurt, which could push it to Rs342.
From my last week’s technical picks, Videsh Sanchar Nigam Ltd edged up during the week and touched a high of Rs459.90 before settling at 452.50 against its previous week’s closing price of Rs450. However, it closed way below its target price. Parsvanath Developers Ltd and Jet Airways Ltd closed below their previous week’s closing price, though both these stocks gained initially during the week.
Vipul Verma is a Delhi-based Investment Advisor. Your comments, questions and reactions to this column are welcome at ticker@livemint.com.
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First Published: Mon, May 14 2007. 12 26 AM IST
More Topics: Money Matters | Equities |