Fresh buying by foreign funds fueled a stock market rally last week triggered by the Budget that reversed negative sentiment. Foreign institutional investors pumped $942.05 million (Rs4,314.6 crore) into Indian equities following the Budget, countering selling by domestic funds.
A global stock rally added to the positive sentiment. Key European indices registered gains on all days of last week and touched six-week highs. In the US, the Nasdaq hit an 18-month closing high on Friday as data showed US employers cut fewer jobs than expected last month and consumer spending strengthened. Reports that the Bank of Japan was considering monetary easing caused the yen to weaken on Friday, boosting stocks of Japanese exporters.
The trend on stock exchanges is likely to remain positive this week, when the US commerce department will release monthly retail sales data for February along with the preliminary reading of data on March consumer sentiment.
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Back home, the week is loaded with critical economic data including industrial and manufacturing output data for January, scheduled for release on 12 March. The markets will also keep a close watch on weekly food inflation numbers for cues on the direction of monetary policy.
Key technical indicators are pointing up. The fact that the Nifty has gained about 9.5% from its recent low of 4,675.4 on 8 February and almost 5.35% from pre-Budget levels does not seem to be making the markets nervous.
The Sensex is likely to meet its first resistance at 17,097 points, followed by 17,367. The second is an important level and could threaten a rising sensex. If the Sensex crosses this level on good trading volumes, the next resistance would come at 17,785, which would decide the market’s short-term trend.
On its way down, the Sensex has its first support at 16,859, a moderate but important level. A fall below this point would trigger some sense of bearishness, with the next support coming at 16,664. If this support is broken, investor sentiment could turn negative.
For the Nifty, the first resistance is at 5,119 points. If overcome, the next resistance is at 5,176. This is a key resistance level and, if breached, would mean more gains, with the final resistance coming at 5,285, which would decide the trend for the Nifty in the short term. On its way down, the index has its first support at 5,041, followed by 4,991.
Among individual stocks, ABB Ltd, Hindalco Industries Ltd and Cipla Ltd look good.
From my previous week’s recommendations, Sterlite Industries India Ltd gained 5.62%, Jindal Steel and Power Ltd advanced about 11% and Hindustan Construction Co. Ltd rose 11.2%—well above their targets.
Vipul Verma is CEO, Moneyvistas.com. Your comments, questions and reactions to this column are welcome at email@example.com