Key Indian indices posted sharp gains last week, outperforming overseas bourses, on rising inflows from foreign institutional investors. The markets posted the best weekly gains in 11 weeks, rising 4.5% and taking the gains for this month to 6%. I mentioned in my last column that volumes would play a crucial role in determining the market direction; last week’s rise came on good volumes, which helped the National Stock Exchange benchmark, the Nifty, reclaim the psychologically important 5,000 points level. Industrial output and manufacturing data for September beat market expectations.
US consumer sentiment data and sales of major retailers announced last week disappointed, but recent upgrades and better-than-expected macroeconomic indicators fuelled market momentum. China’s factory output jumped to a 19-month high in October, data showed, triggering a rally across the US and European bourses.
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This week, there are no major economic indicators due in India that could influence the markets. However, the economic calendar of the US is packed with critical data releases, including October retail sales, the Producer Price Index (PPI), industrial output and capacity utilization, the Consumer Price Index (CPI) and housing starts and initial weekly claims for jobless benefits. Before Monday’s opening bell, the government will release monthly retail sales data. Inflation readings will come with Tuesday’s PPI report on pricing pressures at the wholesale level, followed by CPI data on Wednesday. Housing starts, also due on Wednesday, are forecast to have risen to 600,000 units in October from September’s 590,000. If the data are positive, US bourses could receive a major boost. The S&P is on the verge of 1,100 points; a breakout above this level could trigger the next round of buying on global bourses.
Technically, Indian bourses are pointing higher and on Monday key indices are likely to post gains. In terms of the Nifty, there is strong resistance at 5,013 points. If the Nifty breaks past this level, it would face its next, minor hurdle at 5,052. If this level is crossed with good volumes, the next resistance would come at 5,100 points. This level would be important as a rising Nifty is likely to face stiff resistance, which might trigger some profit-selling. The quantum of selling and supporting volumes would decide the next course. If the selling isn’t supported by good volumes, the Nifty would aim for its recent high of 5,194, though it will face intermediate resistance at 5,149 points.
On its way down, the Nifty is like to come across its first support at 4,974 points, which is a minor level, followed by moderate support at 4,924. If this level is breached, the next support would come at 4,836.
In terms of the Bombay Stock Exchange’s Sensex, the index faces its preliminary resistance at 16,903 points. A breach of this level would ensure gains in the Sensex, which would push the benchmark to 17,052. This would be a moderate support level and may invoke some consolidation. A crossover above this level supported by good volumes would mean more gains. The next resistance would come at 17,201, which is likely to be a strong level. If this level is breached by a rising Sensex on increased volumes, the index would take aim at its recent highs.
Among individual stocks. Housing Development and Finance Corp. Ltd (HDFC), HDFC Bank Ltd and Jindal Steel and Power Ltd look good on the charts. HDFC, at its last close of Rs2,757, has a target of Rs2,796 and a stop-loss of Rs2721. HDFC Bank, at its last close of Rs1,722.25, has a target of Rs1,744 and a stop-loss of Rs1,696 and Jindal Steel and Power, at its last close of Rs697, has a target of Rs712 and a stop-loss of Rs683.
From the previous week’s recommendations, Andhra Bank touched a high of Rs124, against the target of Rs121. HDFC Bank touched a high of Rs1,742, surpassing its target of Rs1,666. Larsen and Toubro Ltd also overshot its target of Rs1,606 by a wide margin.
Vipul Verma is CEO, Moneyvistas.com. Your comments, questions and reactions to this column are welcome at email@example.com