Much on expected lines, global markets saw strong gains following the US Federal Reserve’s plan to buy $600 billion (Rs 26.6 trillion) in government bonds over coming months to boost a slowing economy. Flow of strong global economic data also aided the positive sentiments. The week started with sharply positive manufacturing PMI data from China and India. The better than expected data spurred optimism about the pace of economic growth. Later positive flow of data from Europe and the US added to the positive sentiments. The biggest surprise was monthly non-farm payroll data in US, which suggested the sluggish recovery could be picking up steam. Non-farm payrolls rose a solid 151,000 in October, the first gain since May.
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In India, the policy review meeting of the Reserve Bank of India was on expected lines. However, the indications that the rate hike cycle might halt now gave markets some comfort. Monthly auto sales numbers and cement sales added to market’s optimism about the pace of growth. However, concerns remained over liquidity and inflation. Riding positive sentiments, Indian benchmark closed at records levels on aggressive buying by foreign funds and traders.
Going forward, I think that the rally on bourses, which still seems to have some steam left, could fall short of triggers shortly. Fundamentally, whatever had to come has already come and there are no major triggers lined up. The earnings season will peak out shortly and major announcements related to the US economy have already been made. On the economic calendar, there are no major events listed other than monthly economic indicators and a positive tick in these indicators has already been factored in the market.
Back home, I think it is time now spirited optimism should give way to some caution. Having said that, I do not intend to say there is no upward potential left in the market. The markets would resume gap up on Monday, tracking strong global sentiments. I feel that the concerns over strength of rupee and likely remedial measures taken by the government could affect the foreign funds inflows. Indian rupee strengthened to 44.215 to a dollar on Thursday and is likely to strengthen further. This would be a concern. However, after a consolidation phase and technical correction, the markets may resume their uptrend.
This week India’s industrial output and manufacturing output data would be watched closely on 12 November and there are expectations of good jump in this number over the previous month. However, much of it is already factored in, so there may not be much suspense in this data.
Among key economic indicators this week, Chinese import and export data would be watched closely on 10 November. Rise in Chinese imports would be positive for global stock markets. Also, Chinese industrial output data on 11 November would be important and may give some direction to the market.
Technically, the Nifty, which saw sharp gains last week, could gain further during the week. However, resistance may also emerge shortly, which may hamper momentum. Indian markets are likely to resume higher on Monday and may edge up further during the day. They may see some profit taking towards the end of the session. The trend may remain cautiously optimistic in the initial part of the week, but from the middle of the week, technically some consolidation is on cards.
On its way up, Nifty is likely to see its first resistance at 6,343 points, which is a moderate resistance level. If on its way up Nifty crosses this level, then the next resistance level would come at 6,412, which is expected to be a good resistance level and may see some consolidation. A close above this level could take Nifty to 6,489, which is a strong resistance level in present scenario.
On its way down, Nifty is likely to see some support at 6,285, which is a minor support level. A close below this level would push the support level to 6,180, which is likely to offer good support. A further fall would be bearish for the Nifty as it would severely dent the positive sentiments with support expected around 6,132.
Among individual stocks, Reliance Infrastructure Ltd, Orchid Chemicals and Pharmaceuticals Ltd and Yes Bank Ltd look good on charts this week. Reliance Infra at its last close of Rs 1,050.90 has a target of Rs 1,074 and a stop-loss of Rs 1,022, Orchid Chemicals at its last close of Rs 304.55 has a target of Rs 318 and a stop-loss of Rs 291. Yes Bank at its last close of Rs 374.40 has a target of Rs 386 and a stop-loss of Rs 361.
Vipul Verma is chief executive officer, Moneyvistas.com. Comments, questions and reactions to this column are welcome at firstname.lastname@example.org