This week is a critical week for earnings, which are not just starting to pour in domestically, but also from a US markets perspective.
Market watchers will be keeping a close eye on results from key companies, including Microsoft Corp., Intel Corp., Citigroup Inc., Bank of America Corp., Motorola Inc., Yahoo! Inc., Merrill Lynch & Co. Inc., and JP Morgan Chase & Co.
Except for Motorola and Microsoft, all other firms may provide positive surprises for the US and other global markets to take their next cues. Other than the corporate earnings, Federal Reserve chairman Ben Bernanke will give two days of his semi-annual testimony on the US monetary policy before the American Congress.
However, there are no negatives seen in the testimony, as there is nothing new about inflation and the Federal Reserve has already expressed that the sub-prime problem would not derail economic growth.
Investors will also be getting their regular dose of data as the Bureau of Labor Statistics will release the US Producer Price Index for June on Tuesday and the Consumer Price Index for June on Wednesday. Since some hike is already expected in both these numbers, they are not likely to spring any major negative surprise.
Back home, markets are likely to keep buzzing initially as there are no negative triggers. However, this week, we have some important results lined up fromTata Consultancy Services Ltd (TCS) on Monday, Reliance Energy Ltd on Wednesday, ACC Ltd, Wipro Ltd and Ranbaxy Laboratories Ltd on Thursday and Satyam Computer Services Ltd on Friday.
Since all major technology companies are announcing their results this week, there could be a lot of volatility, driven by these results. But the expectations from technology companies are low and any additional negative surprise could spur selling in these counters, which may derail the overall market’s upward momentum.
Going by expectations, the results of TCS are likely to see the impact of the rupee, while Wipro and Satyam are expected to post encouraging results. On the positive side, whatever issues could emerge from the tech company results would be over by the week’s end. This potentially means that good numbers from other sectors could put the market back on its bullish track a week from today, in terms of corporate results.
Technically, the markets are likely to post initial gains this week, mainly due to the spillover effect of sharp gains over the last week. Moreover, a global rally and expectations of good quarterly numbers may lead to more gains in the initial part of the week. However, later during the week, some profit selling is expected as huge outstanding positions in the derivative segment are likely to weigh on market sentiments. Since derivative contracts for the month of July will expire on 26 July, some churning of the portfolio towards the end of the week is a strong possibility.
In terms of support and resistance, the rising Sensex is likely to test its first resistance at 15,326. If this support is broken, then the Sensex may touch 15,398, which is a moderate support and may see some profit selling. However, a decisive close above this level could take the Sensex to as high as 15,657 points. On the downside, the Sensex is currently at its support level and a fall of 53 points will add to a lot of caution as far as the short-term trend is concerned. If the Sensex falls further than that, it could then fall to 15,116 points, which is the next support level.
If the Sensex breaches this level also, then there would be problem for the bulls in the short term as the Sensex may then test the support level of 14,880 points.
This week, the State Bank of India (SBI), ABB Ltd and Bharat Electronics Ltd look good on charts.
SBI has a resistance at Rs1,580, but if this is crossed, then the stock may gain up to Rs1,620. The stock is currently trading at Rs1,557 and has a stop loss at Rs1,510. ABB, at the last traded price of Rs1,124, is in a consolidation phase and may gain up to Rs1,174 with a stop loss of Rs1,076.
Bharat Electronics, at the current price of Rs1,820, is bottoming out and may gain Rs50 targeting a level of Rs1,870.
From our last week’s recommendation, IVRCL Infrastructure & Projects Ltd gained 9.61% from its recommended price of Rs390 and met its target very comfortably. Suzlon Energy Ltd touched a high of Rs1,520, though it fell short of our technical target. However, the stock is still in buy mode and should touch its target in days to come. Balrampur Chini Mills Ltd remained range-bound with its target still open.
Vipul Verma is a Delhi-based investment adviser. Your comments, questions and reactions to this column are welcome at firstname.lastname@example.org