Ask Mint | Investors await cues from some key economic data

Ask Mint | Investors await cues from some key economic data
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First Published: Sun, Feb 08 2009. 09 26 PM IST

Updated: Sun, Feb 08 2009. 09 26 PM IST
Starting from where I ended my column last week—we are in the middle of a huge rally, which started off three weeks ago. I am still of the opinion that it’s time for a rally on the bourses. Though the key indices ended a bit lower last week, broader indicators such as market breadth, ratio of rising and falling volumes and general strength of the market indicate the fall may not sustain and a rebound is imminent. The rally on the US bourses on Friday somewhat confirmed this and unless there are big shocks globally, there may be an optimistic trend.
This week is very important from the economic data point of view. On 12 February, data related to manufacturing and industrial output for December would come. These numbers have now become more important than inflation and all eyes would be on them to gauge the severity of the economic slump.
On the positive side, there would be lot to watch out for. The mini-budget later in the month will be watched for tax breaks and proposals to boost the economy. There are also hopes of a further drop in interest rates. These hopes are likely to keep the positive sentiments alive. Also this month, the gross domestic product data will be released, which would be watched very closely for affirmation of a downtrend in the economy.
Springing back: A file photo of the Bombay Stock Exchange in Mumbai. Though key indices ended a bit lower last week, broader indicators and the general strength of the market indicate that a rebound is imminent. Punit Paranjpe / Reuters
Globally, the world will revolve around the US economic stimulus package. A big plan will be greeted with lot of optimism and rallies on the bourses, but any shortfalls might trigger a wave of fresh selling. In this situation it is best to wait and watch.
Technically, we are clearly in the middle of a rally and this is likely to hit the bourses this week. Precision analysis clearly indicates that the pivot point of the rally would be 9,418 points, which is also a very important resistance level. If the Sensex closes above this or crosses this level with heavy volumes, it will be a trigger for a rally. There would be another important resistance at 9,515 points, but this will not pose any threat to the positive momentum. If this level is crossed (probability: 95%), there would be a sustained rally till 9,805 points, which would be the next important resistance level.
Technically, there would be some consolidation around this level, which also mean some profit-taking. But, if the Sensex closes above this level, there would more gains as the target point for the rally would then shift to 10,076 points, a key resistance level. A close with high volumes above this level would be an indication that the rally has not ended. But if there is good profit selling around this level, there would be a fall, before the Sensex resumes its uptrend.
On its way down, the Sensex is likely to test its first support at 9,192 points. But this would be a minor support level, with the next support level coming at 9,012 points. This would be an important support level and a close below this would be an indication that positive sentiments have ended and the bears are in control.
For the S&P CNX Nifty, the first resistance and the pivot point is expected to come around 2,872 points. A close above this level would be considered very bullish and the trigger point for the rally. On its way up the next resistance would come up at 2,897 points, which would be a minor resistance. The next big resistance would come at 2,985 points, which might attract some profit selling and consolidation. If the Nifty closes above this level with good volumes, the Nifty would continue its upward trend and would aim for levels of 3,067 and 3,112 points, which would be the next important resistance levels.
On its way down, the Nifty would test its first support at 2,815 points, a minor support that may not withstand and big-ticket selling and breach of this level would lead to a further fall with next and most important support coming up at 2,758 points. This support level would be very important and if the Nifty closes below this level, the bulls will be in trouble as this would be the end of positive sentiments.
Among individual stocks, this week Tata Steel Ltd, Century Textiles and Industries Ltd and Punjab National Bank look good on the charts.
Tata Steel at its last close of Rs186.50 has a target of Rs196 and a stop-loss of Rs173. Century Textiles at its last close of Rs164.95 has a target of Rs173 and a stop-loss of Rs154. And Punjab National Bank at its last close of 399.35 has a target of Rs414 and a stop-loss of Rs381.
From last week’s recommendations, Axis Bank Ltd touched a high of Rs433 and missed its target of Rs449. Lanco Infratech Ltd touched a high of Rs120.90 but fell short of its target of Rs123. Suzlon Energy Ltd hit a high of Rs47.90 missing its target of Rs52, but is still a valid recommendation for this week.
Vipul Verma is a New Delhi-based independent investment adviser. Your comments, questions and reactions to this column are welcome at ticker@livemint.com
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First Published: Sun, Feb 08 2009. 09 26 PM IST