Equities rose for the fifth consecutive week on hopes of policy reforms and series of upgrades by leading global financial institutions of Indian equities. Last week, UBS AG upgraded Indian stocks to overweight, citing attractive valuations and an improving trade balance that could help boost domestic liquidity conditions.

By Shyamal Banerjee/Mint

The Indian markets are now getting ready for the beginning of April-June quarter earnings season, which will be kicked off by Infosys Ltd and Tata Consultancy Services Ltd on Thursday. It is widely expected in the market that information technology (IT) firms might cut their revenue forecast, given recent reports that global companies are cutting their IT spending. Thursday will be an important day from economic data perspective, as India’s factory output for May will be released. Since the broader expectation from this data is quite muted, any negative surprise will actually raise the hopes of interest rate cut in the forthcoming policy review meeting of the Reserve Bank of India. There will be some caution towards the end of the week ahead of monthly Wholesale Price Index numbers scheduled next Monday.

Globally, volatility continued on the US and European bourses as caution prevailed in the euro zone amid the ongoing financial crisis. Though sentiment improved following the EU summit last week, rising bond yields in Spain and Italy remained a big cause of concern. Bond yields in Spain and Italy rose as ECB failed to provide any hints the central bank was ready to take bolder steps in easing monetary policy. The Spanish 10-year government bond yields shot to over 7% on Friday, near their all-time high levels as investors dumped risky assets as they fretted over the efficiency of the anti-crisis tools available at the moment. Markets will keep a close eye on the bond yields in the euro zone as they are likely to weigh on market sentiment. However, hopes of a likely new round of monetary stimulus to boost growth in the US is likely to keep the sentiment positive on global bourses. The economic calendar of the US is lighter this week, which has report on consumer credit scheduled for release on Monday, IBD economic optimism report on Tuesday, producer prices index and Michigan sub-indexes on Friday. Markets will also keep a close watch on earnings in the US.

Technically, the trend on bourses will remain positive, and after a weak start, equities may rebound. However, it will be important to keep track of the support levels, as the benchmark Nifty index on National Stock Exchange of India Ltd has two crucial supports, below which the outlook would turn cloudy. The first such support is at 5,264 points, which is though a moderate support would be crucial for direction in the market. If the Nifty settles below this level on closing or crosses it with good volume, the outlook will turn weak and the next important support will then shift to 5,191 points, which is likely to be an important support for a falling Nifty and should be watched closely. If it settles below this level or falls below this level with good volume, it will be confirmation of a weak sentiment. The next support will then come at 5,156 points, which is a moderate support, followed by another strong support at 5,091 points.

On its way up, the Nifty has its next resistance at 5,351 points, which is a moderate resistance and may not pose a serious threat for the rising gauge. The next resistance at 5,381 points is an important resistance and could offer rising Nifty some chances to consolidate. If it consolidates around this level, the consolidation may continue for three days before the next move. The Nifty will have its next major resistance at 5,461 points.

Among individual stocks, this week ACC Ltd, Bharat Heavy Electricals Ltd (BHEL) and Bank of India look good on charts. ACC at its last close of 1,295.95 has a target of 1,318 and a stop-loss of 1,267. BHEL at its last close of 236.20 has a target of 242 and a stop-loss of 228, while Bank of India at its last close of 352.10 has a target of 359 and a stop-loss of 339.

From my previous week’s recommendations, Bata India Ltd touched a high of 912.5 against the target of 878, Ranbaxy Laboratories Ltd touched a high of 514.9 against its target of 499, while Titan Industries Ltd hit a high of 239.25 against a target of 229.

Vipul Verma is chief executive officer, Moneyvistas.com. Comments, questions and reactions to this column are welcome at ticker@livemint.com.

Also Read | Vipul Verma’s earlier articles

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