After 2006, this is the first time that stock markets have saluted the finance minister with a rally immediately following the Budget’s presentation. Pranab Mukherjee‘s reform-oriented Budget on Friday belied investor fears that it would cause the economy and the markets a lot of pain. To my mind, the Budget brightens economic prospects and reaffirms the Indian growth story.
Indian markets have been prone to decline in tandem with global bourses. This was primarily due to the fact that foreign funds were heavy sellers on Indian markets early this year, coupled with jitters among local investors. I think the Budget should change investor perception and lead to a reclassification of Indian equity as a not-so-risky asset. Given the assumptions of the fiscal deficit and economic growth over the next three years, this should certainly now become a non-debatable issue.
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Globally, market sentiment was dampened last week by the resurfacing of concerns over Greece’s debt problem. Mixed data from the US also kept investors nervous. On Friday, in its second reading, the US commerce department said gross domestic product grew at an annual rate of 5.9% in the fourth quarter, up from the 5.7% estimated earlier. However, a surprisingly sharp drop in existing home sales in January and weak consumer sentiment in February underscored the uneven nature of the US economic recovery.
Photo: Shashank Parade / PTI
Going forward, the trend looks positive and the impact of a drop in the US dollar will be reflected on Asian bourses, which are likely to start on a positive note this week. A possible spurt in commodity prices early this week could boost stocks. The earthquake in Chile, which forced the temporary closure of up to a fifth of the country’s copper mining capacity, could boost copper stocks and metals in general.
Also this week, some very critical data, including US non-farm payroll numbers for February, will be watched closely for cues on the US economy. US data due this week includes the Institute for Supply Management’s index for manufacturing and services sector for February, January personal income and spending, and February car and truck sales.
In India, the HSBC Markit manufacturing Purchasing Managers’ Index data is due on Monday, followed by trade deficit numbers on Tuesday, when monthly sales figures of major automobile companies and monthly cement dispatches data will also be released.
Technically, the markets are pointing up and should resume trading on a positive note on Tuesday after the holiday on Monday on account of Holi.
The Bombay Stock Exchange Sensex is likely to face its first resistance at 16,667 points, which, if overcome, would serve as a positive signal. The next resistance would be at 16,786, again a moderate resistance level. Critical resistance is at 17,070, which if broken, would trigger a short rally.
On its way down, the Sensex would test its first support at 16,330, a moderate support level, followed by strong support at 16,169.
The S&P CNX Nifty faces its first resistance at 4,993 points, which is an important level. If this level is overcome, the resistance would shift to 5,077. On its way down, the first support for a falling Nifty would be at 4,878, a minor support level that would be followed by strong support at 4,802.
Among individual stocks, Sterlite Industries India Ltd, Jindal Steel and Power Ltd and Hindustan Construction Co. Ltd look good on the charts. Sterlite, at its last close of Rs781.05, has a target of Rs798 and a stop-loss of Rs763.
Jindal Steel and Power, at its last close of Rs633.40, has a target of Rs649 and a stop-loss of Rs614. Hindustan Construction, at its last close of Rs133.90, has a target of Rs142 and a stop-loss of Rs128.
From the previous week’s recommendations, ICICI Bank Ltd, IVRCL Infrastructure and Projects Ltd and Punjab National Bank overshot their targets.
Vipul Verma is CEO, Moneyvistas.com. Your comments, questions and reactions to this column are welcome at firstname.lastname@example.org