Stock markets across the world were rattled last week by cuts in the debt ratings of Greece, Portugal and Spain that reinforced concerns that the global economic recovery may be at risk of being derailed. Jitters, meanwhile, persist over the criminal probe of US bank Goldman Sachs,?which?coupled?with the European debt worries, triggered a sell-off on US and European bourses on Friday.
The markets are likely to be cautious amid an economic data deluge this week that includes the release of numbers relating to employment, consumer sentiment, manufacturing and service purchasing managers’ indices and retail sales by key global economies. Investors will watch the numbers closely to gauge the state of the world economic recovery. Reports that the Greek government has agreed on a package of austerity measures with the European Union and the International Monetary Fund that will free up billions of euros in aid should comfort the markets and alleviate concerns about the contagion spreading to other economies.
Non-farm payroll data in the US—scheduled for release on Friday amid expectations that an additional 200,000 jobs were created in the world’s biggest economy in April—would be crucial as an indicator of economic activity in the US. Prior to that, the private sector employment report from payroll processor ADP on Wednesday will also be watched for labour-market trends.
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Back home, the week will start with the release of the HSBC Markit Manufacturing Purchasing Managers’ Index (PMI) for April on Monday. The number for the last month was 57.8; if the index for April is better than March, it would reinforce expectations of increased economic activity. Monthly auto sales figures are already out and the numbers have been good. Monthly cement dispatches data and trade deficit figures will also be released this week.
The expected announcement of an aid package for Greece in return for tough austerity measures to be adopted by Athens will boost sentiment when Asia resumes trading on Monday. However, trading is expected to be range-bound as investors await the release of key data. Technically, the Nifty has good support at around 5,191 points and in normal circumstances, it should hold around that level. If this support level is breached, there would be more bearish pressure and the market could then slip to 5,148. This level could attract some bargain buying, but if trading volumes continues to support lower prices, more declines may ensue. The Nifty, however, has very solid support at 5,091 points.
On its way up, the Nifty will come up against its first important resistance at 5,313 points, followed by 5,376. Trend-deciding resistance is seen at 5,398 points.
Among individual stocks this week, Essar Oil Ltd, ONGC Ltd and Dr Reddy’s Laboratories Ltd look good on the charts. Essar Oil, at its last close of Rs139.95, has a target of Rs146 and a stop-loss of Rs132. ONGC, at its last close of Rs1,054.80, has a target of Rs1,084 and a stop-loss of Rs1,023, while Dr Reddy’s, at its last close of Rs1,259.95, has a target of Rs1,280 and a stop-loss of Rs1,241.
From my previous week’s recommendations, Educomp Solutions Ltd and DLF Ltd triggered their stop-loss while HDFC Bank Ltd hit its target easily.
Vipul Verma is chief executive officer, Moneyvistas.com. Comments, questions and reactions to this column are welcome at firstname.lastname@example.org