Stock markets across the world consolidated in a range-bound fashion last week amid a deluge of data and earnings announcements. Though a majority of the companies that unveiled earnings beat estimates, they failed to enthuse investors deterred by weak global economic indicators. China reported lower monthly industrial production and quarterly gross domestic product data that fell short of expectations, raising renewed questions over the strength of the global economic recovery. On Friday, weak US consumer sentiment data added to the gloom. European indicators were in the expected range, but offered little support to investor morale.
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India’s monthly industrial production data for May also fared poorly against expectations. The markets ended higher on the day the data was released because investors perceived that interest rate increases at the Reserve Bank of India meeting later this month would be minimal. Monthly inflation and weekly food inflation numbers were higher than expectations, reinforcing the case for interest rate increases. On the corporate earnings scorecard, Infosys Technologies Ltd results lagged forecasts though Tata Consultancy Services Ltd turned in an encouraging performance.
This week, economic data and corporate earnings will continue to dictate investor sentiment in the absence of fresh triggers.
Illustration: Shyamal Banerjee/Mint
In the US, financial services firms Goldman Sachs and Morgan Stanley will report earnings, along with technology companies such as Apple Inc., Texas Instruments Inc. and Qualcomm Inc.
Among key economic indicators, investors will focus on housing data after US banks repossessed a record number of houses in the second quarter. The week will begin with the release of the NAHB housing market index for July, followed by data on housing starts for June on Tuesday and existing home sales on Thursday.
Globally, the July consumer confidence data for the euro zone and the Markit Comp Flash purchasing managers index for Germany would be released on Thursday, which would also weigh on investor sentiment.
In India, no major economic indicators are due this week and the markets would continue to take their cues from the US. Corporate earnings, too, are going to be critical this week.
Local stock indices are likely to start lower on Monday, tracking the sharp losses on Wall Street on Friday, though purely technically the markets are on a firm footing. Good gains would have been likely on Monday had the US bourses held up on Friday. After the US decline on Friday, however, the markets are likely to dip on Monday and struggle initially to find support.
Because of the strength of technical indicators, I am expecting a revival in the middle of the week. The Nifty has its first support at 5,351 points. If this level is breached, the next support would come up at 5,319, followed by important support at 5,191.
On the upside, the first resistance for the Nifty would be at 5,440 points, which could see the index consolidating. If this level goes, the next resistance level would come at 5,469 points, followed by strong resistance at 5,498.
In terms of the Bombay Stock Exchange (BSE) Sensex, the first support is at 17,861 points, which is a moderate but important level. A close below this level would be bearish, signalling more declines, with the next support coming at 17,721. A fall below this level may take the Sensex down to 17,436.
On the upside, the Sensex faces resistance at 18,081, a moderate level. It will come up against its next resistance level at 18,168 points, followed by strong resistance at 18,372.
Among individual stocks this week, DLF Ltd, Punjab National Bank (PNB) and Reliance Infrastructure Ltd look good on the charts. DLF, at its last close of Rs319.65, has a target of Rs332 and a stop-loss of Rs305. PNB, at its last close of Rs1,068.80, has a target of Rs1,091 and a stop-loss of Rs1,042. Reliance Infrastructure, at its last close of Rs1,152.05, has a target of Rs1,176 and a stop-loss of Rs1,143.
From my previous week’s recommendations, all the stocks met their targets very easily.
Vipul Verma is chief executive officer, Moneyvistas.com. Comments, questions and reactions to this column are welcome at firstname.lastname@example.org