Driven by global factors, the Indian markets ended the week lower by about 1.5% as uncertainty about Greece kept sentiments low. The political drama, which stretched throughout the week, ended on Saturday after Greek Prime Minister George Papandreou survived a parliamentary confidence vote, avoiding snap elections, which would have torpedoed Greece’s bailout deal and inflamed the euro zone’s economic crisis. This is a positive for the global stock and bond markets.
This is not the end of the crisis. It may still have many twists and turns, though the broader uncertainties are somewhat clearer. Since Italy seems next in queue, rejoicing over Greece may be short-lived as concerns over turmoil in the euro zone will continue. On the brighter side, I hope markets would focus on the fabulous earnings season in the US so far and a slew of encouraging economic data in that country. The most crucial employment numbers—non-farm payroll data released on Friday—showed the US unemployment rate hit a six-month low in October and job gains in the prior two months were stronger than previously thought, pointing to some improvement in the still-weak labour market. Market sentiments continue to remain positive despite euro zone troubles and should gain in the initial part of the week. In the Indian context, the sentiments will continue to remain positive unless the Nifty index on the National Stock Exchange settles below 5,141 on a closing basis. Till the time the Nifty floats above this, the underlying sentiment will remain positive and the bounce back will be shortly followed after a fall, if any.
Technically, on its way up, the Nifty will have its first resistance at 5,295, a moderate resistance level. However, if this level goes, the next resistance would come at 5,323, which would be another moderate resistance and may not offer any serious threat to the rising Nifty. The next would come at 5,367, which would be like a trend decider. If the Nifty crosses this level with good volumes, there would be a rally, which technically has all the potential to rise to 5,650.
Before this, there would be two more important resistance levels. The first, at 5,498, would be an important level to watch, which if broken would mean further gains. However, technically, I am seeing some consolidation followed by mild profit taking, which will not threaten the potential of the rally. Once this level is crossed with good volumes, the next, at 5,612, would become the next important milestone. By this level, the Nifty might start losing momentum; so it would be advisable to track volumes. Since this entire technical buoyancy is like swimming against the current, it would be advisable to keep an eagle’s eye on volumes. Any signs of volumes dropping should be seen with a lot of caution and the trigger for profit taking. However, due to any global or domestic economic reasons, if the Nifty retreats, it would most likely come across its first support at 5,191, which is likely to be a moderate support level. This would be followed by an important support at 5,156, which is most important level to watch.
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As mentioned before, if this level is breached, there would be negative sentiments and a further fall on the bourses. Since the economic indicators are quite important, it would be better to keep an eye on global as well as domestic economic indicators. Among global indicators next week, the US economic calendar is light as the US government’s data on the consumer price index and producer price index is due, apart from regular weekly jobless claims on Thursday. China has a busy calendar, which includes producer price index, consumer price index, retail sales and industrial output for the month of October due on Wednesday, followed by Chinese international trade data on Thursday. Back home, the trading week is shortened by two local holidays on Monday and Thursday. The data for India’s industrial output and manufacturing output will be released on Friday. The industrial output data will affect market sentiments. Apart from this, developments in the euro zone will have a major impact on market sentiments globally.
Among individual stocks, Aban Offshore Ltd, Titan Industries Ltd and HDFC Ltd look good on the charts. Aban Offshore Ltd, at its last close of Rs 430.15, has a target of Rs 440, and a stop-loss of Rs 418; Titan, at its last close of Rs 217, has a target of Rs 226, and a stop-loss of Rs 207, while HDFC, at its last close of Rs 683.90, has a target of Rs 695, and a stop-loss of Rs 670.
From my previous week’s recommendations, Bharat Heavy Electricals Ltd and Indian Bank met their targets, while Development Credit Bank Ltd missed it by a whisker and continues to remain a valid recommendation.
Vipul Verma is chief executive officer, Moneyvistas.com. Comments, questions and reactions to this column are welcome at firstname.lastname@example.org