After a healthy start, equities ended the week with marginal gains as late profit-selling pared most early gains. The week was, however, quite action-packed due to the expiry of derivative contracts for April, the Reserve Bank of India’s policy review meeting and earnings from major companies such as Reliance Industries Ltd and Bharti Airtel Ltd.
However, the market succumbed to late profit-selling triggered by concerns over strengthening of the rupee and RBI’s future course of action on monetary tightening.
While the inflation figure, at 6.09%, was in line with market expectations, it still remains quite high, which may invoke some more action from the central bank. Though international markets remained buoyant, with the Dow Jones Industrial Average crossing the psychologically key 13,000 points and scaling historical highs, the mood on domestic bourses is now cautious. That, despite a bumper earnings season so far.
This week, the action on bourses is likely to be limited as the market will open for only three trading sessions in a holiday-shortened week. However it will continue to take cues from global bourses and, if the global trend remains buoyant,, then the market is likely to recover later in the week.
This week, the US market will itself eagerly watch for big numbers from the likes of Procter & Gamble Co. and General Motors Corp., and going by analysts’ expectations, these numbers are likely to be good. This will keep the momentum going unless there are some negative surprises.
However, on Friday, the US April payroll data will be watched carefully, which may give markets some direction. Institutional investors are also wary that Beijing may soon switch to monetary tightening in the wake of data showing robust first-quarter economic growth and higher-than-expected consumer price inflation.
If China goes in for monetary tightening, it may impact bourses globally—a glimpse of which we have already seen a couple of weeks ago—and India might not be an exception.
Back home, the market clearly lacks positive triggers and is likely to, at least initially, extend Friday’s fall. Even this week, there are some big quarterly results scheduled from the likes of Hindustan Unilever Ltd and Reliance Communications Ltd, but they may not be able to change the mood on the bourses, even if they are good. Also, due to holidays, buyers may refrain from enlarging their commitment, which may also dampen overall sentiment.
Technically also, the charts point to a southward movement and, on its way down, the Bombay Stock Exchange’s Sensex may witness its first support at 13,746 points, which is a good support level. However, if this support level is broken, then the Sensex may fall to 13,538 points, which is likely to provide a solid support to a falling Sensex.
However, on its way up, the Sensex is likely to test its first key resistance at 14,069 points, which is a minor resistance level, and the next resistance level lies at 14,218 points. If the rising momentum breaches this level also, then the Sensex may test its recent high of 14,384 points.
This week, on our technical radar are stocks such as Shree Renuka Sugar Ltd, Tata Consultancy Services Ltd (TCS) and Maruti Udyog Ltd. Shree Renuka is currently trading at Rs441 and has the potential to move up to Rs474 in coming weeks, with a stop loss of Rs410. TCS, at its current market price of Rs1,234, is under pressure due to the rising rupee, but may gain on technical grounds and can touch Rs1,285, with a stop loss of Rs1,189. Maruti looks reasonably strong at the current price of Rs791 and can touch Rs835 if the market stabilizes. The stock has a stop loss of Rs767. However, investors must note that since the broader market is likely to fall, one should wait and watch for the market to stabilize, before taking a call on these stocks. Since this is a holiday-shortened week, the targets may extend to the next week.
From our last week’s picks, Suzlon Energy Ltd touched a high of Rs1,235 from the previous week’s close of Rs1,190, but missed the technical target of Rs1,248. HDFC Bank Ltd had a very good run and touched a high of Rs1,045, almost meeting the target of Rs1,048. Meanwhile, Dr Reddy’s Laboratories Ltd, which saw a small spurt as expected, touched a high of Rs732.50 during 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