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Ask Mint | Q3 earnings remain the biggest cue for markets

Ask Mint | Q3 earnings remain the biggest cue for markets
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First Published: Sun, Jan 17 2010. 08 33 PM IST

Updated: Sun, Jan 17 2010. 08 33 PM IST
Last week was a mixed bag for global stock markets. Asian markets looked strong and their counterparts in the US and the West appeared to be on shaky ground.
Weak US economic data including job numbers, retail sales and consumer sentiment triggered concern among investors. The US earnings season also started on a negative note with aluminium maker Alcoa Inc. reporting lower than expected earnings. JPMorgan Chase & Co. reported deep fourth-quarter losses on mortgage and credit card loans, raising concerns about bank profits, although chipmaker Intel Corp. posted better-than-estimated results.
In Asia, the week began on a positive note after China reported strong trade data. Back home, strong November industrial output data, better than expected company earnings and statements by finance ministry officials added to the comfort of stock markets.However, rising inflation (WPI), which touched 7.3% in December, its highest since November 2008, led to some concern of monetary policy tightening by Reserve Bank of India (RBI) when it meets on 29 January. In the US this week, investors will focus on the earnings of market bellwethers such as , , Bank of America Corp., Morgan Stanley and Goldman Sachs Group Inc. to gauge the strength of the US economy. International Business Machines Corp.Google Inc.
Sector call: Bank stocks may under-perform initially on cocerns over a possible tightening of monetary policy by RBI on 29 January. Harikrishna Katragadda / Mint
Data that could influence stock markets next week includes US reports on housing starts, producer prices and leading indicators.
Domestic cues
In India, there is no major economic event due this week and the focus would be on third-quarter earnings, which have been good so far. From a broader perspective, the markets are in a phase of positive, range-bound consolidation.
The sharp fall on US and European bourses and the strength of the US dollar could affect sentiment on Asian markets, including India, at the opening. But any initial decline is unlikely to be substantial with investors’ sights set on corporate earnings.
Sector-wise, bank stocks may under-perform initially because of concern over a possible tightening of monetary policy by RBI at its meeting this month.
Levels to watch
Technically, chances of a move up still remain intact despite a likely weak opening on Monday.
On its way up, the Bombay Stock Exchange benchmark, the Sensex, faces resistance at 17,626, which if overcome, would signal a short rally that would take the index to its next resistance level at 17,741.
This level would attract some profit taking and even some consolidation. If this level is overcome, the next resistance would come at 17,913 followed by 18,131.
On its way down, the Sensex has its first support at 17,518 points, which is a moderate but important level. If it falls below this level and settles on good trading volumes, it would signal weakness, with the next support coming at 17,441 points. This would also act as a moderate support level and if this level goes, the the next big support would come at 17,311 points, which would decide the direction of the Sensex in the short term.
In terms of the S&P CNX Nifty, the first support is expected at 5,232 followed by 5,171 points. This support would define the direction of the Nifty in the short term. On its way up, there is strong resistance at 5,276 points, which if overcome would signal gains; the next resistance is at 5,313 points. If this level is also crossed, the Nifty would aim to test resistance next at 5,378 and 5,422 points.
Trading ideas
Among individual stocks this week, Balrampur Chini Mills Ltd, HCC Ltd and IVRCL Infra Ltd look good on the charts.
Balrampur Chini, at its last close of Rs135.25, has a target of Rs142 and a stop-loss of Rs129. HCC, at its last close of Rs156.30, has a target of Rs163 and a stop-loss of Rs150. IVRCL Infra, at its last close of Rs385.20, has a target of Rs404 and a stop-loss of Rs371.
From my previous week’s recommendations, ACC Ltd gained about 9% and overshot its target. Reliance Media World Ltd missed its target and still continues to be a valid recommendation. Jindal Steel and Power Ltd triggered its stop-loss.
Vipul Verma is CEO, Moneyvistas.com. Your comments, questions and reactions to this column are welcome at ticker@livemint.com
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First Published: Sun, Jan 17 2010. 08 33 PM IST