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Shyamal Banerjee/Mint

Shyamal Banerjee/Mint

Markets to watch inflation data

Markets to watch inflation data

After a dull week on global bourses, there was some reason to cheer on Friday. Chinese gross domestic product (GDP) data showed the world’s No. 2 economy grew at 7.6% in the second quarter, which was though pretty much in line with the expectations but allayed fears of a slowdown. Equities across Europe and the US rallied as commodity prices shot up supporting the spurt in equities. Friday also turned out to be a good day from earnings point of view.

In India, there was extreme caution ahead of the beginning of the big-ticket earnings season as there were many concerns about Infosys Ltd’s revenue guidance. The earnings released by Infosys on Thursday added to the gloom as the company said it sees revenue in dollar terms rising 5% to $7.34 billion in the fiscal year to March, down from its April estimate of 8-10% growth. The market had expected Infosys to trim its growth forecast to 6-8%. Though Tata Consultancy Services Ltd made up for some of the loss of sentiment as its earnings exceeded forecast by posting a 38% annual jump in quarterly profit, but given the economic situation, expectations from corporate earnings is low.

Shyamal Banerjee/Mint

Globally, the earnings and Ben Bernanke, chairman of the US Federal Reserve, will be the keys to market sentiment. What will matter the most to the US and global markets is Bernanke as he is due to deliver his semiannual monetary policy report to the Senate and House committees on Tuesday and Wednesday. Analysts will focus on every word he says for mention of any possibility of monetary easing or the much-hyped third quantitative easing and how he views the slowing economy.

At home, technically the markets are still in a rough patch and unless the benchmark Nifty index on the National Stock Exchange of India Ltd settles above 5,312 points, broader sentiment will remain cautious with a downward bias. On Monday, the markets are likely to open with a positive gap mainly due to the rally on the US and European bourses following better-than-expected Chinese GDP data. The first test for a rising Nifty will come at 5,267 points. If it is able to hold above this level with high volumes, it will be the first positive signal for the markets. If the Nifty fails to breach this level and falls, it will be a bearish signal and the support at 5,212 points will become a key support. If the Nifty settles above 5,267 or breaches it with good volumes, it will be a positive signal and there will be a 80% chance of gains of upto 5,302 points, which is another resistance level. The resistance around this level will actually be a band between 5,302 and 5,312 points. If the Nifty closes above this band, the sentiment on bourses will turn positive with the next resistance at 5,356 points followed by strong resistance at 5,391.

On the downside, the first support is placed at 5,212 points, which is a good support level. If this level goes, the next support will come up at 5,191 points, which is technically an important support for the markets. A close below this level will be bearish with a 83% chance of further downslide. The Nifty is then likely to find support at 5,156 points.

Among individual stocks, Bharat Heavy Electricals Ltd (Bhel), Orchid Chemicals and Pharmaceuticals Ltd and Voltas Ltd look good on charts. Bhel at its last close of 231.30 has target of 237 and a stop-loss of 223, Orchid Chemicals at its last close of 121.30 has a target of 226 and a stop-loss of 215, while Voltas at its last close of 113.05 has target of 117 and a stop-loss of 107.

From my previous week’s recommendations, ACC Ltd and Bank of India triggered their stop-losses, while Bhel failed to meet its target and continues to be a recommendation this week.

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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