Markets show positive momentum; NSG clearance to boost sentiment

Markets show positive momentum; NSG clearance to boost sentiment
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First Published: Mon, Sep 08 2008. 12 43 AM IST

Updated: Mon, Sep 08 2008. 12 43 AM IST
Last week was a highly volatile one for the Indian markets with key indices ending little changed over the previous week as gains in the initial part of the week were offset by profit-selling towards the close.
The Sensex, the Bombay Stock Exchange’s benchmark index, closed the week with a loss of 80.7 points from the previous week, while the National Stock Exchange’s S&P CNX Nifty index closed with a 7.7-point loss. However, despite the minor losses, Indian markets performed better than most markets in Asia—only Pakistan did better as the markets there witnessed gains during the week. The region’s key stock markets such as Japan, Taiwan, Hong Kong, China, South Korea, Singapore and Malaysia all witnessed sharp losses.
As mentioned in last week’s column, the trend for equities remained unclear despite further fall in oil prices and inflation slowing to 12.34%. But for the current week, India’s ability to get the nuclear deal through the Nuclear Suppliers Group is a positive trigger, which may provide some relief to the sagging sentiment prevailing in the markets.
Though the group has agreed to lift the ban on nuclear trade with India, the actual impact of the deal, which still needs approval from the US Congress, will be felt only in the long term. But Saturday’s development will boost sentiments in the short term, as it means new opportunities for the energy sector as well as industries and companies associated with it.
Also, it is likely to give a big boost to the economy as this deal could be the answer to India’s quest for energy to sustain its economic growth. As a result, Indian stock markets are likely to outperform bourses abroad despite weak global sentiments.
Data centric: A file photo of stockbrokers in Mumbai. Markets will wait anxiously for the monthly industrial output and manufacturing output data and if these show further slowing, it could dent sentiments. Prashanth Vishwanathan / Reuters
However, issues over the slowing economy and higher rates of inflation might crimp the rally, which is likely to be witnessed in the early part of the week. Markets would anxiously wait for the data related to monthly industrial output and manufacturing output on Friday, which, if they show further slowing, could dent sentiments. Before that, the regular dose of inflation data will be watched closely on Thursday and that too will weigh heavily on the trend.
Technically too, the markets are now showing signs of a positive momentum building up—key technical indicators including moving averages and oscillators point to that. Another key analysis suggests that there could be a big rally, which might take the Sensex to 16,562 points (as long as it is able to hold above 13,978 points), which means gains of more than 2,000 points in coming weeks.
Focusing strictly on this week, the Sensex is likely to witness sharp gains in the initial period and will come across its first resistance at 14,662 points. If the index closes above this level with higher rising volumes, then there will be further gains as the next significant resistance level is at 15,113 points, though there will be a moderate resistance at 14,793. If the Sensex closes above 15,113 points, then there will be an immediate resistance at 15,273, followed by a deciding level at 15,588. A close above this resistance level would mean strengthening of the trend with further support coming at 15,805 and 16,063 points.
On its way down, the Sensex would test its first support at 14,287 points, followed by a trend-deciding support at 13,978 points. A fall below this could be considered bearish with expectations of further declines.
For the CNX Nifty index, the first resistance is seen at 4,422 points. This is a key level and crossing of this level would mean more gains with the next significant resistance coming up at 4,523 points. A close above this level will mean further gains. The next key resistance for the Nifty will then come at 4,623 points and a close above that would mean a sustained bullish trend, with the next two resistance levels at 4,749 points and 4,856 points.
Among sectoral indices, the BSE Mid-Cap Index, which closed at 5,753.72, is still in a consolidation phase and has a very important resistance level at 5,856 points. If the index closes above this, then there will be a rally of 178 points, which will take it to the next key resistance level of 6,034 points. Crossing this level will put the index on a bullish mode. On its way down, the index will find its first support at 5,591 points, following which the next support will come up at 5,472 points.
The BSE Small-Cap Index, which last closed at 6,905.22, is also in a consolidation phase and has its first key resistance level at 7,019 points, followed by another at 7,091 points.
If the second level is crossed, there may be a rally that could take the index to 7,297 points—a very critical resistance level. A close above this level would mean a strong rally. On its way down, the index would face its first support at 6,771, followed by a strong support at 6,512 points.
Among individual stocks, Bharat Electronics Ltd, NTPC Ltd and Tata Power Co. Ltd look good on our charts. Bharat Electronics, at its last close of Rs943.95, has a target of Rs969 with a stop loss at Rs915. NTPC, which last closed at Rs173.50, has a target of Rs185 and a stop loss of Rs158, while Tata Power, which closed at Rs1,076.45 on Friday, has a target of Rs1,110 and stop loss at Rs1,036.
From last week’s recommendations, ACC Ltd touched a high of Rs596, well above its target of Rs580. Sterlite Industries (India) Ltd rose to a high of Rs643, almost meeting its target of Rs645, while Yes Bank Ltd, at the week’s high of Rs145.8, met its target of Rs142 comfortably.
Vipul Verma is a New Delhi-based independent investment adviser. Your comments,questions and reactions to this column are welcome at ticker@livemint.com
To read all of Vipul Verma’s earlier columns, go to www.livemint.com/aheadoftheticker
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First Published: Mon, Sep 08 2008. 12 43 AM IST