An order by the Securities and Exchange Board of India (Sebi) barring 14 insurance firms from selling unit-linked insurance plans (Ulips) could dent stock market sentiment after a nine-week winning streak. The order on the weekend to insurers including HDFC Standard Life Insurance Co. Ltd, Aviva Life Insurance Co. Ltd and Birla Sun Life Insurance Co. Ltd came at a time when positive economic data and strong inflows from foreign institutional investors had spurred along a market rally.
The insurance industry regulator responded to Sebi’s order by directing insurers to ignore the directive and continue to sell and service Ulips, which offer a combination of insurance and investment. The move by the Insurance Regulatory and Development Authority (Irda) may limit the damage.
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Sebi’s intention is to get these entities to register with it and sell their products after they receive the market regulator’s prior approval. It does not intend to kill Ulips. So, invoking compliance rather than unsettling insurance companies was called for.
This week is important for the stock markets. On Monday, the markets will focus on industrial output and manufacturing output data that’s due for release. The data will provide cues to investors on the strength of the Indian economy. The expectations are high and if the data maintains the trend of high growth seen in the previous months, there could be a spurt in share indices. Since a hike in interest rates by the Reserve Bank of India (RBI) this month has already been factored into share prices, positive data won’t be countered by pessimism related to monetary policy tightening.
On Tuesday, the fourth quarter earnings season will kick off with Infosys Technologies Ltd announcing its results. A host of other companies are scheduled to release their earnings later in the week.
The markets will be closed on Wednesday.
Globally, too, company earnings will be the next big trigger for stock markets. In the US, the earnings season will start with results from aluminium maker Alcoa Inc. on Monday. Other companies reporting earnings this week include Intel Corp., Google Inc., General Electric Co. and JPMorgan Chase and Co. On the economic data front this week, the US consumer price index and March retail sales numbers would be released on Wednesday and industrial production figures on Thursday while housing starts and consumer sentiment reports would be released on Friday. These economic indicators would be watched very closely by investors to gauge the speed of the recovery in the world’s biggest economy.
Economic cues: The Bombay Stock Exchange. On Monday, the markets will focus on industrial output and manufacturing output data. AP
Back home, technically, the markets are likely to start on a cautious note and trading could be range-bound. In terms of the Bombay Stock Exchange (BSE) Sensex, the first resistance is likely to come up at 17,991 points. Any breakout above this level on healthy trading volumes could see gains being extended. The next technical resistance level is expected at 18,131, which could see come consolidation and mild profit-selling. If this level is crossed, accompanied by strong trading volumes, there would be further gains.
On its way down, the first support for the Sensex is likely to come at 17,843 points, followed by 17,676. Any breakout below this level would be a negative sign, indicating more falls, with solid support expected only at 17,373 points.
In terms of the S&P CNX Nifty, the first resistance is seen at 5,399 points. A breakout above this level would spur more gains. The next resistance is likely at 5,448 points, which could see the beginning of a technical correction if northward momentum flags above this level. If this level is crossed, the next resistance would come at 5,513 points.
On its way down, the first support for the Nifty is seen at 5,291, which is a decisive level. Any breakout below this level supported by good volumes would be considered bearish, with targets like 5,256 and 5,191 points for meaningful support levels.
Technically, an important study is suggesting that the markets could see selling pressure from Thursday and may end this week with losses.
Among individual stocks this week, Lupin Labs Ltd, Tech Mahindra Ltd and Reliance Mediaworks Ltd look good on the charts. Lupin, at its last close of Rs1,630.20, has a target of Rs1,659 and a stop-loss of Rs1,604. Tech Mahindra Ltd, at its last close of Rs850.05, has a target of Rs868 and a stop-loss of Rs834. Reliance Mediaworks, at its last close of Rs224.75, has a target of Rs235 and a stop-loss of Rs215.
From my previous week’s recommendations Yes Bank Ltd, Bharat Earth Movers Ltd and ABB met their targets easily.
Vipul Verma is CEO, Moneyvistas.com. Your comments, questions and reactions to this column are welcome at email@example.com