Indian stocks rallied last week on across the board bargain buying by funds and traders. Though fundamentally there were still no triggers for this kind of buying sentiment as high crude prices, high inflation, likelihood of further hike in interest rates by the Reserve Bank of India, and resurfacing of euro zone debt crisis, apart from the unrest in the Middle East and North Africa region, continued to dominate sentiments.
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Bargain hunters lapped up beaten down stocks, hoping for the Indian growth story to continue. The key Sensex index on the Bombay Stock Exchange rallied 5.24% and S&P CNX Nifty on the National Stock Exchange shot up 5.22%. India was the best performing major market in the world. Leading global indices such as Germany’s DAX, France’s CAC40, Britain’s FTSE 100, Hong Kong’s Hang Seng, Russia’s Micex Index, South Korea’s Kospi and US indices, Dow Jones and Nasdaq, all fared well and saw their best week of 2011. Global bourses gained as the economic data continued to buoy optimism about global economic recovery. US impressed with its fourth quarter GDP number as the economy grew more quickly than previously estimated as businesses restocked shelves to meet rising demand. Though there was some disappointment over US consumer sentiment, which fell to its lowest level in more than a year in March, as petrol and food prices rose.
Optimism was in air over the earnings season, which is set to start from second week of April. Adding to the optimism was the forecast by Oracle of a rise in new software sales for its current fiscal quarter. The outlook fuelled hopes that a global resurgence in technology spending remains intact.
There was no major news from China last week, but news from Europe was rather bad. The credit crisis in Portugal weighed on sentiments in Europe. A moderate dip in German business confidence, as measured by the closely watched report by Munich’s Ifo think tank, which showed its business climate index, based on a monthly survey of some 7,000 firms, inched down to 111.1, dented sentiments. Since it was better than projections, it failed to dent the momentum on German bourses. Japan continued to remain a major worry and rising level of radiation could expose the Japanese economy to heightened crisis in time to come.
It’s time again to take stock of monthly developments in the global economies, and the week promises to be hectic on the economic calendar. It begins with Indian infrastructure output due on 31 March, followed by fiscal deficit and trade deficit data the same day. On 1 April, the HSBC Markit manufacturing PMI data would be released. Industry numbers such as monthly auto sales data will also be released by key auto firms on the same day. Globally, Chinese NBS PMI and HSBC PMI data would be released on 1 April, which would be watched closely for cues on Chinese data. In the US, jobs data would be the key economic indicator and would be watched closely.
Technically, the trend on bourses is likely to remain positive. To be sure, technically the charts are showing some volatility on Monday. A unique technical study is suggesting that Sensex and Nifty would open with an upward gap on Monday and would inch up in initial hours of trading. However, there is likelihood of profit-taking, which could pare the gains.
If Nifty closes in red, which this particular study is suggested, then Tuesday would be range-bound with buying emerging at lower levels, which is around 5,560 points. It is most likely that this level would hold in normal circumstances. But in case this level goes and the Nifty falls below this level with good volumes, then a downward patch of 30 points would open, with support coming around 5,528. It will be a strong level and likely to offer strong support. However, if this level is breached, the downward pressure could mount with support shifting to 5,474 and and solid support at 5,434 points.
On the upside, this rally has the potential to go up to 5,711, which is likely to be strong resistance. However, before that the Nifty would likely see resistance at 5,682 points. If it crosses the strong resistance with good volumes, or settles above it, it would push the key resistance to 5,754.
Among individual stocks, Jindal Steel and Power Ltd, IFCI Ltd and Bhushan Steel Ltd look good on the charts. Jindal Steel at its last close of Rs665 has a target of Rs678 and a stop-loss of Rs648. IFCI at its last close of Rs53.80 has a target of Rs56.50 and a stop-loss of Rs51, while Bhushan Steel at its last close of Rs443.05 has a target of Rs456 and a stop-loss of Rs428.
Vipul Verma is chief executive officer, Moneyvistas.com. Comments, questions and reactions to this column are welcome at email@example.com