Global stock markets extended their gains last week on a string of positive economic data. Indian and Japanese markets stretched their winning streak to a seventh week while the US posted its fourth weekly gain in a row.
Investors were comforted by a deal announced by euro zone leaders on Thursday to settle the debt crisis in Greece under which Athens would receive loans from other countries in Europe and the International Monetary Fund (IMF) to ease its difficulties.
There is a risk of fiscal burdens bogging down other members of the European Union such as Portugal, the debt rating of which was cut on Wednesday by rating company Fitch Ratings Inc., but the temporary easing of the crisis in Greece will likely keep investor sentiment positive.
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There is some steam left in the rally on global bourses, which are likely to stay upbeat this week. However, the rally is approaching its peak and investors would do well to brace themselves for it.
Yields on US bonds are rising, with benchmark treasury yields close to 4%, not a happy situation for stock markets. If the yields continue to rise, there could be a flight of money from equities to government debt. Rising yields would also increase the cost of borrowing, affecting corporate profitability and economic recovery in the US.
This week, investors will watch out for a string of critical US data, including private sector job numbers on Wednesday and non-farm payrolls on Friday.
Though US markets would be closed on Friday, investor sentiment could dip in case the non-farm payrolls data comes in below expectations. The markets expect the creation of 190,000 jobs in the US in March.
Upbeat: The New York Stock Exchange building. Markets expect 190,000 new jobs in the US in March. Stan Honda/AFP
In India, the week would be quite data-heavy. Infrastructure output data for February would be released on Wednesday, followed by the HSBC Markit manufacturing PMI (purchasing managers’ index) for March on Thursday. Better -than-expected data could boost equities. Numbers relating to auto sales and cement dispatches will be released on Thursday, and will be watched closely. The markets will be shut on Good Friday.
Technical factors point to gains. The Bombay Stock Exchange Sensex, on its way up, is likely to face its first resistance level at 17,681 points, which is a moderate but crucial level. The next resistance level is at 17,821. A technical correction could ensue on profit selling on good trading volumes at this level. If the Sensex holds above this level, more gains could be ahead, with the benchmark aiming to cross 18,000. The next major resistance level would come up at 18,301.
On its way down, the index would find its first support level at 17,569, followed by 17,352. The index has strong support at 17,021.
Speaking of the Nifty, the first resistance is at 5,298, which, if overcome, could send the index to a new recent high. A crucial resistance level is at 5,396. On its way down, the index is likely to find its first support at 5,267, followed by 5,191 and then at 5,156.
Among individual stocks this week, Allahabad Bank, Tata Power Co. Ltd and Tata Consultancy Services Ltd (TCS) look good on the charts. Allahabad Bank, at its last close of Rs143.45, has a target of Rs150 and a stop-loss of Rs137. Tata Power, at its last close of Rs1,364.45, has a target of Rs1,391 and a stop-loss of Rs1,337. TCS, at its last close of Rs825.05, has a target of Rs842 and a stop-loss of Rs808.
From my previous week’s recommendations, Bajaj Hindustan Ltd triggered its stop-loss, but Sun Pharmaceutical Industries Ltd and Alstom Projects India Ltd overshot their targets by a wide margin.
Vipul Verma is CEO, Moneyvistas.com. Your comments, questions and reactions to this column are welcome at firstname.lastname@example.org