Global stock markets completed their best quarter—and the best month—of the year in September as signs of a recovery in key economies heartened investors. The latest set of economic data in the US and Europe, which have been beset by turmoil, provided some comfort though European worries aren’t over yet; the latest trouble spot in the continent is Ireland, which has reported deteriorating finances.
Asian stock markets outperformed counterparts in the rest of the world on heavy buying by foreign funds. In India, foreign inflows, and short-covering by traders towards the end of the week saw stock indices gain around 1.9% for the week. Signals that the US Federal Reserve would move to ease monetary policy to bolster recovery in the world’s biggest economy also helped boost global market sentiment.
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Investors are likely to turn cautious, however, ahead of a plethora of economic data scheduled to hit this week, the most important being US employment numbers, which will reflect the strength of the US economy and its ability to create jobs, and signal how urgent it is for the Federal Reserve to move on monetary policy easing. The ADP employment report on private sector jobs will be released on Wednesday, followed by weekly jobless claims on Thursday and finally the non-farm payroll report on Friday. Other data that will be closely watched include pending home sales and factory orders for August to be released on Monday.
This week will also mark the beginning of the earnings season in the US and as usual aluminium maker Alcoa Inc. will be the first to announce its quarterly results on Thursday. Other US companies reporting earnings this week include Yum Brands Inc., Costco Wholesale Corp., Monsanto Co. and PepsiCo Inc.
Back home, there are no major data due out this week and the earnings season is yet to start. The markets will take their cues broadly from global economic data and the direction of overseas bourses. Persistent buying by foreign funds and short covering by traders is expected to keep key indices firm.
Technically, on its way up, the S&P CNX Nifty will meet its next resistance at 6,192 points, which is a moderate resistance level. If the index is able to cross this level, the Nifty would come up against its next resistance at 6,248, followed by strong resistance at 6.313, which should see some consolidation and profit selling. On the downside, the first support for a falling Nifty is seen at 6,073. If support holds, there would be some consolidation around this level. If the Nifty breaks below this support level, selling could gather momentum. Nifty would find moderate support at 6,032, which may not be able to withstand large-scale profit selling. The Nifty will then test its next and strong support level at 5,933. If the index falls below this level, it would mean a short-term trend reversal with more declines likely in following sessions.
Among individual stocks this week, Bhushan Steel Ltd, Century Textiles and Industries Ltd and Kotak Mahindra Bank Ltd look good on the charts. Bhushan Steel, at its last close of Rs 434.35, has a target of Rs 449 and a stop-loss of Rs 416. Century Textiles and Industries, at its last closing price of Rs 518.85, has a target of Rs 533 and a stop-loss of Rs 501 while Kotak Mahindra, at its last close of Rs 496.55, has a target of Rs 512 and a stop-loss of Rs 481.
Vipul Verma is chief executive officer, Moneyvistas.com. Comments, questions and reactions to this column are welcome at firstname.lastname@example.org