Finally, 15,000 points is a reality now. Last week, heavy buying by foreign funds and selective buying by retail investors pushed the Bombay Stock Exchange’s benchmark index, the Sensex, to yet another high; more significantly, the index crossed an important barrier of 15,000 points. However, the Sensex closed below this level on mild profit selling by investors due to nervousness ahead of the beginning of corporate earnings season.
Still, the undertone on bourses remained positive on firm global trends. Market sentiments will get a further boost from a surprisingly strong US employment report released on Friday, which reinforces the view that the Federal Reserve would maintain interest rates at their present level. US employers added a higher-than-expected 132,000 non-farm jobs in June, while hiring figures for April and May were also revised significantly upward. This is a positive sign for the global bourses, which track US stock market movements.
This week, the focus is clearly going to be on earnings globally. These will provide markets necessary trigger for their next move. While results expected in US such as those of Alcoa Inc., Genentech Inc. and General Electric Corp. are all expected to be good, there is a lot of scepticism about results expected in India, such as those of Infosys Technologies Ltd, which will release its financials for the first quarter of this fiscal on Wednesday.
A lot has been said and written about technology stocks and the rupee’s rise but there is still a lot to be seen when Infosys comes out with its numbers. Market expectations are negative as the appreciating rupee is likely to cast its shadow on the financials of these companies but that is only one side of the story. Software firms are still growing and the booming US economy can only further their prospects—the US is the largest market for all large Indian software services firms. And the appreciating rupee alone can’t spell doom for software stocks as all export-oriented companies hedge the risk of foreign currencies to minimize its impact on their earnings.
In my opinion, the impact of the rupee’s appreciation has already been discounted to a large extent in the stock prices of all software companies and the market would rather look forward to the revenue guidance of next quarter and rest of the fiscal year to take necessary clues about their likely movement on bourses. Any optimistic projections on these counts may actually trigger a rally.
Investors would need to watch out for other important results such as those of Bajaj Auto Ltd and HDFC Bank Ltd as these may give important signals about the likely trend in their respective industries. While auto stocks are likely to remain subdued, bank stocks may get some positive surprises from the first quarter numbers.
Other than the quarterly results, investors will also watch oil prices carefully as these are moving close to their peak. High oil prices could push inflation higher, putting pressure on interest rates.
Back home, the market is likely to rise on Monday and once again scale past the 15,000 points mark. But this time, the closing of the Sensex would be very important. If the Sensex closes above this level, then there would be more gains in store in the following days. But a close below this level would mean caution on the bourses and market could witness some profit selling. Wednesday and Thursday, being important days from the earnings perspective, and equities are likely to follow the news and numbers on both days rather than any other trend. Technically, the market is set for further gains and the results may give it the necessary momentum.
The rising Sensex may face its first resistance at 15,122 points, following which the next resistance will be at 15,368 points, while on its way down, the Sensex would test its first support at 14,722 points, following which the next support would come at 14,550 points.
Stocks to watch
This week, on our technical radar are stocks like Balrampur Chini Mills Ltd, IVRCL Infrastructure and Projects Ltd and Suzlon Energy Ltd. Balrampur Chini, at its current market price of Rs75, has the potential to move up to Rs83 with a stop-loss of Rs69. Suzlon, at Rs1,489, is showing signs of good short rally, which may take the stock to Rs1,560, with a stop-loss of Rs1,449. IVRCL Infrastructure, at Rs390, is a good technical bet with a target price of Rs414 and stop-loss of Rs371.
From our last week’s recommendations, Adlab Films Ltd, recommended at Rs562, touched a high Rs595, almost meeting its target of Rs599. Punj Lloyd Ltd, recommended at Rs259, comfortably met its target of Rs282, touching a high of Rs284.25 and gaining 9.69% during the week. Bombay Rayon Fashions Ltd, recommended at Rs250, touched a high of Rs262, but missed its target of Rs274.
Vipul Verma is a Delhi-based investment adviser. Your comments, questions and reactions to this column are welcome at firstname.lastname@example.org