Market will need a bigger trigger3 min read . Updated: 25 Mar 2012, 10:25 PM IST
Market will need a bigger trigger
On expected lines, volatility ruled the bourses, and as I mentioned in my last column, the trend on bourses remained range-bound, and after an initial fall, equities saw good buying. The volatility could largely be attributed to a leaked draft report by the government auditor saying faulty policies on selling coalfields to private and state companies may have cost the exchequer $211 billion in lost revenue.
Talking in terms of stock markets, this will not have much impact though there will be some uneasy calm and cautious sentiment. Markets will need bigger triggers now to overcome cautious sentiment, which can only come through better-than-expected corporate earnings or interest rate cut in the next policy review meeting of the Reserve Bank of India, due next month.
Globally, the trend remained mixed as weak economic indicators from China, Germany and France weighed on market sentiments. The US economy though continued to impress markets with better-than-expected economic indicators. However, at the end of the week, the US indices Dow Jones and S&P 500 posted losses. The Nasdaq, however, posted moderate gains. The losses on European bourses were more. France was the top loser, falling 3.30%, followed by Germany and the UK. India was though best performer among Brics economies with Russia down about 4.82%. Since both S&P 500 and Dow Jones bounced back from their critical resistances, therefore, the outlook going forward looks positive on global bourses. The economic calendar for this week is quite hectic and this will have some bearing on the market sentiments globally. The key economic indicators in the US due this week include March consumer confidence on Tuesday, February durable goods orders on Wednesday, the final look at fourth-quarter gross domestic product on Thursday, and February personal income and spending data on Friday as well as the Chicago Purchasing Managers Index, and the final reading on March consumer sentiment. It will be a good idea to watch out for these indicators.
In India, the trend continues to remain range bound with critical resistance at 5,467 points, while the critical support rests at 5,167 points. A break on either side will become the trend for the 50-share Nifty index on the National Stock Exchange in the short term. In the medium and long term, the trend continues to remain positive on Nifty. This week the Nifty is likely to see its first resistance at 5,302 points, however, since this is a minor resistance so it would not pose any serious threat to the rising Nifty. If this level is breached, then the next meaningful resistance would come at 5,383 points, which is likely to be a major resistance for Nifty. Unless this level is breached with good volume, the trend will not be confirmed.
A comfortable close above this level or break above this level with good volume will be the first confirmation of positive trend in Nifty. The next resistance, which is at 5,467 points, would be the litmus test for the trend and if this level is breached with good volumes or Nifty settles above it on closing basis, the positive trend on bourses would be finally confirmed. On the downside, the first meaningful support is likely to come at 5,220 points. This is a key support for the Nifty, as sentiment will turn bearish if this level is breached. Though this level will not be a confirmation of bearish trend in the short term as the Nifty will have its most important support at 5,167 points. As mentioned earlier, if Nifty settles below this level on closing basis, this will be a bearish signal, indicating further fall.
Among individual stocks, this week Indusind Bank Ltd, Dish TV India Ltd and Hindalco Industries Ltd look good on the charts. Indusind Bank at its last close of ₹ 311.65 has a target of ₹ 322 and a stop-loss at ₹ 298. Dish TV at its last close of ₹ 58.05 has a target of ₹ 61.50 and a stop-loss at ₹ 54, while Hindalco at its last close of ₹ 131.40 has a target of ₹ 137 and a stop-loss at ₹ 123.
From my previous week’s recommendations, Dish TV and LIC Housing Finance Ltd met their targets easily. However, Kotak Mahindra Bank Ltd triggered its stop-loss.
Also Read |Vipul Verma’s earlier columns