Volatility ruled the bourses for yet another week amid speculation over the likely outcome of the much-awaited policy review meeting of the Reserve Bank of India on 17 April. Since the markets remained closed in the later half of the week, there was not much action, but the benchmark indices still managed to close with gains of about 2.4%. Overall, the underlying sentiment on bourses remained cautiously positive ahead of the earnings season. However, the global pressure and hangover of the issue related to taxation of foreign funds was clearly visible on bourses as unabated buying by foreign funds fizzled out and they were seen booking profits. The new dimensions to the worries about the euro zone debt crisis was added last week, after the Spanish debt prices suffered as a hangover from a weak debt auction and stirred worries about the country’s ability to tackle fiscal problems.

By Shyamal Banerjee/Mint

At home, the week is quite action-packed as big-ticket earnings will start this week with Infosys Ltd’s numbers scheduled on 13 April. Apart from earnings, crude oil price, which has seen volatile movement in recent weeks, will also be in focus as technical analysis of Brent crude suggests there could be an upward pressure. Brent has a strong resistance at $126.77, which if broken could trigger a spike in crude prices, which would be detrimental to the stock market momentum. Indian markets are sensitive to crude oil prices because of inflationary pressures. Apart from crude, India’s industrial output in February will also be watched closely. A strong number will be a positive for economic momentum, but may subdue the case of interest rate cut in the forthcoming meeting of RBI to review monetary policy. However, continued weakness will make the case for interest rate cut stronger. This week, the market movement will also be guided by the hopes and expectations of the policy review meeting scheduled next week as bank, real estate and auto stocks will continue to see volatility.

Technically, the trend on Indian bourses continue to remain locked in a broad range despite strong gains last week. However, now the upper band of the range of National Stock Exchange of India Ltd’s benchmark Nifty index has shifted down to 5,378 points as this level has become relevant. If the Nifty closes above this level with good volume, then the outlook will become positive with further gains likely in following sessions. If this level goes on a closing basis, then the next meaningful resistance will come up at 5,456 points, which is again an important resistance level and could offer the rising Nifty good resistance and may force some consolidation. However, if the Nifty marches forward and breaks this resistance, the outlook will turn brighter with next resistance shifting to 5,523 points. But it will not threaten the positive trend as the final resistance for the Nifty, which would be the likely top, will come up at 5,618 points. Please note this analysis is only valid when the Nifty settles above 5,378 points on a closing basis, as till then the range-bound movement will continue.

On the downside, the Nifty has its first support at 5,291 points, which is a moderate support and may not withstand volume-led selling. However, if it settles below this level, the next support will come up at 5,230 points, which is a strong support and should be able to hold unless there is a fundamental change in the market. However, if the Nifty breaks below this level, it will be a bearish signal and will indicate further fall, with next support shifting to 5,133 points. But this will not be a base as this will only be a moderate support. The base for Nifty is likely to be at 5,048 points in the present conditions. Though it is broadly expected that the gauge will resume with a moderate downward gap on Monday, this will not alter the outlook of the market according to my analysis.

Among individual stocks, this week JSW Steel Ltd, DLF Ltd and Yes Bank Ltd look good on charts. JSW Steel at its last close of 718.65 has a target of 729 and a stop-loss of 702. DLF at its last close of 204.40 has a target of 211 and a stop-loss at 197, while Yes Bank at its last close of 373.55 has a target of 381 and a stop-loss at 361.

From my previous week’s recommendations, Tata Steel Ltd hit its target easily, while PRAJ Industries Ltd missed its target narrowly and continues to remain a valid recommendation. However, Aurobindo Pharma Ltd triggered a stop-loss.

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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