Bullish global economic indicators and easing worries over the Dubai debt crisis catapulted major global bourses to their annual highs as investors returned to the bourses in a holiday-shortened week. Positive economic data from the US, Eurozone, China and Japan boosted investor sentiment and fuelled the rally. US economic data showed a drop in initial jobless claims and growth in durable goods orders suggested an economic recovery was picking up steam. Interestingly, equity markets moved up despite a rising dollar index as investors looked beyond liquidity boosters to economic fundamentals.
Back home, optimism was in the air for the third quarter earnings season. Upgrades in the gross domestic product growth estimates for the fiscal year also boosted investor sentiment. The government’s reassurance that its economic policies would be growth-oriented also propelled the markets.
Moving ahead, the holiday mood is still in the air. Markets in the US and all major European bourses would be closed on Friday and the UK, Indian, Australian and New Zealand markets would be shut on Monday, so no major fund activity is expected.
However, gains are likely to be extended this week on optimism about a sustained global economic recovery. In the US, however, the Treasury’s $118-billion auction of two-year, five-year and seven-year notes will be watched by investors for clues to demand for US debt as efforts to fuel growth pump up government spending in the world’s biggest economy. Besides this, the Conference Board’s index of December consumer confidence will merit the Wall Street’s attention on Tuesday. The October S&P/Case-Shiller home price index will be watched closely on Tuesday, apart from the weekly government report on jobless claims on Thursday. French third quarter gross domestic product (GDP) data on Tuesday would also be watched for a sense of economic activity in Europe.
Back home, the economic calendar is quite packed this week. On Thursday, fiscal deficit data for November is due. The ABN AMRO India Manufacturing PMI (purchasing managers’ index) for December would be watched very closely. The index was pegged at 53 last month and any significant improvement in this indicator would be a big positive for the markets. The chances of a decline are very remote as basic indicators have been positive during December. On 1 January, India’s trade deficit and imports and exports for the month of November would be released, which are important economic indicators. Monthly auto sales numbers from leading manufactures would be another indicator that would be watched very closely for cues on India’s manufacturing industry.
Festive mood: The New York Stock Exchange is all lit up. No major fund activity is expected this week as markets in India will be closed on Monday, while those in the US and the UK will be shut on Friday. Daniel Acker/Bloomberg
Technically, the markets are all set to touch new 52-week highs this week as the trend is clearly pointing up. Some key technical indicators are even suggesting sharp gains this week. In terms of the S&P CNX Nifty, the first meaningful resistance is at 5,252 points, and if this is crossed then the next resistance would come at 5,297 points. This level would offer a rising Nifty some trouble, but would not be strong enough to arrest the momentum. If this level is crossed, the next resistance would come at 5,411 points, which could threaten to retard the momentum. I am expecting profit selling to emerge at this level.
On its way down, the Nifty will have its first, moderate support at 5,128 points. It would be followed by 4,991 points, which is a strong support and should offer solid ground for the Nifty to bounce.
In terms of the Bombay Stock Exchange (BSE) Sensex, the base is set for 18,000 points this week. However, the Sensex would see its first resistance at 17,513 points, followed by 17,745 points. I am expecting a very strong resistance emerging at 18,074 points, which would arrest the positive momentum. On the downside, support for the Sensex is placed at 17,191, 16,912 and 16,733 points.
Among individual stocks, Hindustan Zinc Ltd, CESC Ltd and Alstom Projects India Ltd look good on the charts. Hindustan Zinc, at its last close of Rs1,208.90, has a target of Rs1,238 and stop-loss of Rs. 1,176. CESC, at its last close of Rs391.20, has a target of Rs404 and stop-loss of Rs377, while Alstom Projects India, at its last close of Rs564, has a target of Rs582 and stop-loss of Rs548.
From my previous week’s recommendations, JSW Steel Ltd, Sesa Goa Ltd and Hindustan Zinc Ltd all overshot their targets by a wide margin.
Vipul Verma is CEO, Moneyvistas.com. Your comments, questions and reactions to this column are welcome at email@example.com