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By Shyamal Banerjee /Mint

By Shyamal Banerjee /Mint

Markets may be set for gains

Markets may be set for gains

What happened on Friday on the US bourses was a matter of comfort to investors. Despite a technical default by Greece, which was confirmed after the International Swaps and Derivatives Association (Isda) said the nation had triggered an insurance payment on credit default contracts, the US bourses ignored the most feared event of recent times and, instead, took comfort in better-than-expected non-farm payrolls report released by the labour department, which showed that US employers added 227,000 jobs in February, while the unemployment rate held at a three-year low of 8.3%.

By Shyamal Banerjee /Mint

It seems that some depth has been added further to the northward trend and market sentiments have remained positive on the global bourses, despite a technical call for correction in most major stock markets.

The Indian markets, which ended lower for the third consecutive week, are now headed for a critical week, loaded with a lot of important events, which include review of monetary policy meeting of the Reserve Bank of India, Indian Economic Survey, rail budget and, finally, the big daddy of all events, the federal budget. The markets have high hopes from all these events. First, the credit policy, scheduled on 15 March, would set the tone for the bourses.

The rail budget would also be watched closely for freights. A rise in freight rates would be taken negatively by the stock markets. However, the federal budget would be the most crucial event as it would set the path for the stock markets.

The markets have lots of expectations on economic reforms, fiscal deficit and tax reforms. If the finance minister fails to deliver on market expectations, which has become a serious concern following the outcome of the state assembly elections, there could be a knee-jerk reaction on the bourses. At this point, the fundamental outlook looks uncertain. Technically, the markets are looking more mature and are offering clarity about the trend. The trend on the bourses is up and markets are likely to post gains after three weeks of fall.

On its way up, the first resistance for the National Stock Exchange’s benchmark Nifty index is likely to come up at 5,372, which is a moderate resistance level.

If the Nifty breaks this level with good volume, this would be the first positive signal on the bourses, though it will still not be a confirmatory signal for the trend. The next important resistance would come at 5,427-5,456, which is likely to be an important band. If the Nifty settles above this band accompanied by good volume, this would be a positive sign and would indicate further gains on the bourses. Since this level would be a confirmation of the positive trend on the bourses, the markets would aim for higher levels.

The next resistance would come up at 5,512, which would be a moderate level and could disrupt the momentum on the bourses. If the Nifty faces resistance and sees some profit selling around this level, 5,456 would become an important support; under normal circumstance, the Nifty should bounce off from there. However, if the Nifty crosses resistance at 5,512, the next major resistance would come up at 5,633 points.

On the downside, the first support for the Nifty would come at 5,291, which is likely to be a moderate support. A fall with good volume might weaken this level. The next support would come at 5,262, which is likely to be an important support level. The Nifty is likely to take support at this level. However, a fall below this level would be a bearish signal, which means that the Nifty may fall below last week’s low level of 5,171 as the next major support lies at 5,148 points.

Among individual stocks, this week Allahabad Bank, IndusInd Bank Ltd and Bata India Ltd look good on the charts. Allahabad Bank, at its last close of 195.80, has a target of 202, and a stop-loss of 186. IndusInd Bank, at its last close of 316.35, has a target of 324, and a stop-loss of 304, while Bata, at its last close of 688.35, has a target of 703, and a stop-loss of 672.

From my previous week’s recommendations, Axis Bank Ltd met its target easily, Tata Steel Ltd triggered its stop-loss, but bounced back sharply. However, Bharti Airtel Ltd missed its target and is still a valid recommendation.

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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