Key indices not only closed with gains, but also touched 52-week highs last week on fresh buying by foreign funds. The gains were driven by better- than-expected corporate results and increased liquidity. Worries over the monsoon were calmed by positive feedback on the economy although persistent concerns over a global economic recovery reined in the northward momentum in share prices.
Reliance Industries Ltd, India’s most valuable company, Tata Steel Ltd and Hindustan Unilever Ltd disappointed with their earnings reports, but a host of better- than-expected results gladdened investors. The big event of last week—the Reserve Bank of India’s quarterly review of monetary policy—contained no monetary measures, as expected by the markets. Other economic indicators were also in line with market expectations.
Going forward, the mood on the markets remains bullish with more gains expected this week, especially given that July sales of Mahindra & Mahindra Ltd jumped 22%, Maruti Suzuki India Ltd leapt 33.4% and Steel Authority of India Ltd rose 25%.
Technically too the trend looks positive and suggests more gains at least in the initial part of the week. The Bombay Stock Exchange’s (BSE) benchmark index, the Sensex, looks all set to test 16,000 points in the early part of the week, with the resistance shifting to 15,914. This level would be strong resistance and may trigger mild profit-selling. An uptrend would resume soon with the next resistance shifting to 16,033 points.
However, this would be a minor resistance level and may not offer any significant hurdle to a rising Sensex. If the index crosses this level with ease, the next resistance would be at 16,234 points, which would be a moderate level. The Sensex would come up against strong resistance at 16,551 points.
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On its way down, the Sensex would find important support at 15,503 points. A close below this level would be a bearish signal. The next support is at 15,408 points. If the Sensex breaches this level and closes below it, selling could intensify, with the next meaningful support at 15,010 points.
In terms of the S&P CNX Nifty, the first resistance is expected at 4,697 points, which is a minor resistance level. If this level goes, the next resistance would come up at 4,734 points. This is a critical resistance level and might trigger mild profit-selling. If this level goes the the next resistance would come at 4,806 points, which is a moderate level, followed by strong resistance at 4,933 points.
On its way down, the Nifty would test support at 4,588 points, followed by 4,512 points. If this level goes, the next support would come at 4,420 points.
Among individual stocks, this week Allahabad Bank, Bharat Heavy Electricals Ltd, or Bhel, and United Phosphorus Ltd look good on the charts.
Allahabad Bank, at its last close of Rs88.50, has a target of Rs94 and a stop-loss of Rs84. Bhel, at its last close of Rs2,230.30, has a target of Rs2,284 and a stop-loss of Rs2,176 while United Phosphorus at its last close of Rs171.40, has a target of Rs179 and a stop-loss of Rs164.
From my previous week’s recommendations, Bank of India triggered its stop-loss, while Reliance Infrastructure Ltd and Welspun Gujarat Stahl Rohren Ltd met their targets very easily.
Vipul Verma is CEO, Moneyvistas.com. Your comments, questions and reactions to this column are welcome at firstname.lastname@example.org