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Ask Mint | US Fed policy meeting to set the pace

Ask Mint | US Fed policy meeting to set the pace
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First Published: Sun, Dec 13 2009. 09 37 PM IST

Updated: Sun, Dec 13 2009. 09 37 PM IST
Equities and key indices were range-bound last week as investors remained cautious. India’s industrial production grew 10.3% in October, but the news failed to cheer investors whose expectations had been higher, although the data pointed to brisk economic activity and underlined the strength of the industrial recovery.
The global scenario held some dark spots as well. There were jitters about a delay in the debt restructuring package for Dubai and a cut in the debt rating of Greece to BBB+ by Fitch Ratings—the first time in 10 years that it had been lowered to below an A rating.
Standard and Poor’s revised its outlook on Spain to negative. The two rating actions rocked European markets and the impact was felt on bourses elsewhere too.
Adding to the negative sentiment was an unexpected 1.8% month-on-month decline in German industrial output, although US economic indicators such as monthly retail sales, consumer confidence and weekly jobs data were positive.
Moving ahead, the main cues for the global markets this week would come from the US Federal Reserve’s assessment of the US economic outlook after it concludes its final policy meeting of 2009 on Wednesday. Investors are weighing signs that the US economic recovery is gaining strength, which could possibly push capital markets closer to a time when the Fed has to contemplate scaling back some accommodative measures. The Federal Reserve’s assessment would be watched closely by global markets in this context.
Among economic data, US industrial production numbers are set for release on Tuesday, along with the November producer price index; housing starts are due on Wednesday, along with a reading of the Consumer Price Index for November.
Key data: The Khari Baoli market in Delhi. This week, there’s not much on India’s economic calendar other than the Wholesale Price Index data for November, and local markets will take cues from global economies. Ramesh Pathania / Mint
Leading indicators, a gauge of the US economy’s prospects, are due on Thursday, along with weekly jobless claims and a survey of factory activity in the US mid-Atlantic region.
Back home, there is not much on the economic calendar other than the Wholesale Price Index data for November. The local markets would be driven more by the dollar movement and cues from the US and other global economies. Foreign funds would be monitored closely because their inflows normally slow around the holiday season.
Technically, the consolidation last week now seems to be heading for a positive breakout as markets have shown resilience on every decline and have found good support on moderate falls.
For the Sensex, on its way north, the first resistance is likely to come at 17,205 points, which is a moderate level. If this level is crossed, the next resistance level would come at 17,371 points. This level would be crucial; if the Sensex crosses this level on good volumes, there could be a rally which would push the resistance to 17,544. This will not be the end of the rally because it would be a moderate resistance level and a minor hurdle. There would be strong resistance around 17,867 points.
On its way down, the first support for the Sensex is expected at around 17,010 points. This is a crucial support as a fall below this level would be bearish and would trigger more declines. The next support will come at 16,796 points, which would decide the direction of the Sensex in the short run. A fall below this level would mean an extended technical correction.
For the S&P CNX Nifty, the first resistance is expected at 5,134 points, followed by strong resistance at 5,186; if this level is broken, the next resistance would come at 5,247 points, followed by strong resistance at 5,321.
On its way down, the Nifty is expected to find support at 5,046 points, which is an important level. If it goes, the next support is likely to come at 4,991 points. After that, there could be a very important and rock-solid support at 4,802 points.
Among individual stocks, this week Reliance Infrastructure Ltd, Kotak Mahindra Bank Ltd and Jaiprakash Associates Ltd look good on the charts. Reliance Infrastructure, at its last close of Rs1,067.40, has a target of Rs1,098 and a stop-loss of Rs1,033. Kotak Mahindra Bank, at its last close of Rs802.85, has a target of Rs834 and a stop-loss of Rs775. Jaiprakash Associates, at its last close of Rs229.55, has a target of Rs244 and a stop-loss of Rs214.
From my last week’s recommendations, Bata India Ltd and HCL Technologies Ltd overshot their targets, but Welspun Gujarat Stahl Rohren Ltd missed its target and is still a valid recommendation.
Vipul Verma is CEO,Moneyvistas.com. Your comments, questions and reactions to this column are welcome at ticker@livemint.com
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First Published: Sun, Dec 13 2009. 09 37 PM IST