Markets likely to remain edgy2 min read . Updated: 11 Jun 2012, 08:26 AM IST
Markets likely to remain edgy
Hopes of an interest rate cut by the Reserve Bank of India (RBI) in its 18 June meeting and falling global oil prices triggered a rally on the Indian stock market last week as funds and traders bought bargains. After starting on a cautious note, sentiment changed following comments from RBI deputy governor Subir Gokarn that falling global oil prices and declining core inflation and economic growth gave RBI room to lower interest rates. Taking the cue from Gokarn’s remarks, traders and funds resorted to fresh buying in rate-sensitive stocks such as banks, automobile makers, real estate and infrastructure firms.
In China, weekend data related to industrial output, retail sales and inflation was satisfactory as industrial output remained better than the pervious month and also slightly above expectations, while retail sales remained slightly lower. The Spanish bailout and the Chinese data will boost Asian markets on Monday, but caution will prevail till the outcome of election results in Greece early next week.
Technically, the outlook for the Indian stock markets remains positive. On its way up, the benchmark Nifty index of the National Stock Exchange is likely to see its first resistance at 5,133 points, which is an important resistance level. If the Nifty survives this and manages to hold around this level, and even better settles above this level, then it would be a positive. The next important resistance would then come at 5,178 points. A probability analysis of momentum suggests there is close to a 84% chance of profit-selling around this level. But this would not threaten the short-term momentum in the Nifty, which means that though there would be profit-selling around this level, which may bring down the Nifty lower, it will not alter the positive trend. If the Nifty closes above this level, and volumes remain high, the next resistance target would shift to 5,256 points.
On the way down, the Nifty has its first support at 5,011 points, which is a moderate but important level. Any fall below this with good volumes or close below this level would be bearish in the immediate term. The next support is then placed at 4,954 points, which is a good support. If the Nifty falls below this level with good volumes, or settles below this level on closing basis, it would mean further weakness. The Nifty has its next support at 4,881 points. It is likely to see strong support at this level.
Among individual stocks, this week Rural Electrification Corp. Ltd (REC), ACC Ltd and Welspun Corp. Ltd look good on the charts. REC at its last close of Rs169.60 has a target of Rs175 and a stop-loss of Rs163. ACC at its last close ofRs1,147.10 has a target of Rs1,173 and a stop-loss of Rs1,115. Welspun Corp. at its last close of Rs123.70 has a target of Rs127.50 and a stop-loss of Rs118.50.
From my previous week’s recommendations, Jet Airways (India) Ltd gained as much 21.53% during the week. Needless to say the stock hit its target easily. GAIL (India) Ltd also met its target comfortably, but Balrampur Chini Mills Ltd missed it by a whisker and remains a valid recommendation for this week.
Vipul Verma is chief executive officer, Moneyvistas.com. Comments, questions and reactions to this column are welcome at email@example.com.
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