Global markets paused briefly for more cues and confirmation of an economic recovery, though investor sentiment seemed bullish. Despite consolidating, markets in the US, the UK, France, Germany, Japan, Hong Kong, South Korea, Singapore, India, Russia and Brazil all posted gains over the past week. Globally, economic data was mixed.
In the US, the weekly jobs data spurred optimism, but consumer and retail data came as dampeners. Concern was sparked by Chinese inflation data, causing investors to weigh the chances of strong monetary tightening. China’s inflation rate rose to a 16-month high in February. Some analysts said the data may have been seasonally distorted; China’s consumer price index typically rises in the month of the Lunar New Year holiday, which occurred in February this year but in January last year, which could have been the reason for the inflationary spurt.
India’s monthly industrial and manufacturing data was robust, showing output increasing at a pace of 16.7% in January, in line with market forecasts.
This week, the markets are likely to consolidate further before seeking a breakout. The key event would be the Federal Reserve’s assessment of the economy at the end of its interest rate-setting meeting on Tuesday. The Fed is expected to hold benchmark rates near zero and reiterate its pledge to keep them low for an extended period. But any indication of a tightening of monetary policy in the US could trigger another round of selling on the stock markets. Other indicators due for release in the US include February housing starts, the Producer Price Index and the Consumer Price Index, both for February, and weekly initial jobless claims. A two-day meeting of the Bank of Japan would also be watched closely for cues on monetary policy in Japan.
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Back home, no major economic data is due this week and the Indian markets will look overseas for their cues. Technically, the markets are likely to move up and the trend is likely to remain up despite the ongoing consolidation.
In terms of the Bombay Stock Exchange’s (BSE) benchmark Sensex, the first resistance is likely to come at 17,240 points, an important level. If this level is overcome, the next resistance level would be at 17,372 points, which is a moderate level. The next resistance level is at 17,531, which if crossed would be a new recent high.
On its way down, the Sensex is likely to see its first support coming at 17,021 points, which is a moderate but very important support level. A close below this level on good trading volume would mean the onset of bearish sentiment. The Sensex’s next support is at 16,791 points. There should be good support for the index at 16,666 points.
In terms of the S&P CNX Nifty, the first resistance is likely at 5,159 points. Any close above this level on good trading volumes would signal more gains. The next resistance for the Nifty would be at 5,213 points, which is a moderate level. If this level is crossed, the next resistance would be at 5,245, followed by a trend-deciding resistance at 5,305 points.
On its way down, support for the index is likely to come at 5,091 points. If the Nifty closes below this level on good trading volume, the next meaningful support would be at 4,991 points.
Among individual stocks, Steel Authority of India Ltd (SAIL), Welspun Gujarat Stahl Rohren Ltd and LIC Housing Finance Ltd look good on the charts. SAIL, at its last close of Rs234, has a target of Rs246 and a stop-loss of Rs223. Welspun Gujarat, at its last close of Rs263.50, has a target of Rs273 and a stop-loss of Rs254. LIC Housing Finance, at its last close of Rs810, has a target of Rs827 and a stop-loss of Rs792.
Vipul Verma is CEO, Moneyvistas.com. Your comments, questions and reactions to this column are welcome at firstname.lastname@example.org