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Technically, some hope for markets

Technically, some hope for markets
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First Published: Sun, Nov 27 2011. 09 12 PM IST

Shyamal Banerjee/Mint
Shyamal Banerjee/Mint
Updated: Sun, Nov 27 2011. 09 12 PM IST
At the outset, I must say I went wrong last week in my column. I was expecting markets to bottom out, but they resumed their downtrend, which led to a weekly loss of about 3.5-4% on the Indian bourses. Though the fall of the Nifty index on the National stock Exchange below 4,831 points was expected, I think it was the outcome of a momentum on the bourses.
Shyamal Banerjee/Mint
Global cues were principally responsible for both the magnitude and momentum of the fall. Unlike previous weeks, markets last week had something to cheer. The clearance for higher foreign direct investment (FDI) in retail was a boost to markets as it indicated the government is not sleeping on economic reforms. The Prime Minister’s meeting with airline chiefs was also a positive for the stock markets. However, uncertainties in euro zone with indications suggesting no signs of easing of the crisis was bad news for the global stock markets. Adding to the crisis was the persistent weakness in the euro against the dollar as Italy’s borrowing costs spiralled and Belgium’s credit rating was downgraded. Adding a new dimension to the crisis was the poor auction of German bunds mid-week, which raised serious concerns that the debt crisis is spreading to Europe’s core.
Uncertainties in the euro zone will continue as the next round of bond auctions from Europe will be more closely watched than the economic indicators in Europe. Rising sovereign bond yields spooked equity investors and they will wait to see the bond yields this week. If the same trend continues, there could be more pain on bourses worldwide.
This week will be important from economic indicators’ point of view. In the US, new home sales and the S&P/Case-Shiller home prices index will be released on Monday, followed by data on confidence among consumers scheduled for release on Tuesday. On Wednesday, the manufacturing report from the Institute for Supply Management would be released, apart from ADP employment report in the US. In India, data related to quarterly gross domestic product (GDP) and data on India’s infrastructure output for October will be released. On Thursday, the Asian purchasing managers’ indices (PMIs), including China’s manufacturing PMI and India’s HSBC Markit manufacturing PMI, and monthly auto sales will be watched closely for cues. Since Indian data has shown weakness previously, PMI numbers will be tracked more closely. The trend in auto and cement will be of importance for the markets.
In the US, weekly jobless claims on Thursday will be released but Friday will be important as report on non-farm payroll and unemployment rate will be released, which would be watched closely as it would give a clearer picture of the US economy.
Back home, technically, we are in the last leg of the current downswing. Though I do not intend to say the pain in the market is getting over because as long as uncertainties continue on the global horizon, chances of fall will continue to loom large. But in the immediate term, technically it seems that most of the selling is being done and some recovery is on the cards.
Technically, the Nifty has a good resistance at 4,771, which is likely to be a crucial resistance. If the Nifty breaches this mark, there would be a spike, which would take the Nifty to another important resistance of 4,857. Some profit selling and consolidation is expected around this level. However, if this level is breached with good volumes, chances of further gains will brighten as the Nifty will then target 5,038 as the next resistance level. This level will be strong, but it may not be enough to reverse the trend. However, the 5, 156 level will be the next important resistance as a close above this will mean bullish undertone and sentiments. On its way down, the Nifty will find crucial support at 4,634 points. A close below this will mean the continuation of bearish trend with the base of the Nifty shifting to around 4,176 points. This does not mean this level will necessarily come, but this would become the next base for the market, which was earlier placed around current levels. In terms of support this week, after 4,634 the next support will come at 4,562, followed by the next and the most important support level at 4,491 points.
Among individual stocks, Jindal Saw Ltd, Dish TV India Ltd and Kotak Mahindra Bank Ltd look good. Jindal Saw, at its last close of Rs 121.95, has a target of Rs 126, and a stop-loss of Rs 116; Dish TV, at its last close of Rs 62.45, has a target of Rs 66.5, and a stop-loss of Rs 58. Kotak Mahindra Bank, at its last close of Rs 447.15, has a target of Rs 459, and a stop-loss of Rs 432. From my previous week’s recommendations, Oil and Natural Gas Corp. Ltd missed its target by a whisker and is a valid recommendation, Yes Bank Ltd met its target, but ICICI Bank Ltd triggered its stop-loss.
Vipul Verma is chief executive officer, Moneyvistas.com. Comments, questions and reactions to this column are welcome at ticker@livemint.com
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First Published: Sun, Nov 27 2011. 09 12 PM IST