Bulls & Bears Still On a Similar Track Chasing Each Other

The range-bound movement in the Indian stock market continued last week too. The stock markets opened on a negative note and traded with a negative bias to close lower by 1.7%. Except for Sunpharma and ACC, all the NSE India and BSE India stocks were responsible for this fall. Rpower was at the forefront. Amongst all NSE BSE sectors, Realty, Infra and Metal sectors performed the worst. All the remaining days moved in a range of 5235 to 5160. The second day opened positive and closed flat due to a tug-of-war between TCS at the positive front and Ambuja falling badly. All NSE India and BSE India sectors closed flat. On the third day, the poor quarterly performance of Wipro dragged the stock markets and the IT sector downwards. However, the stock markets recovered due to some other sector stocks like Sterlite Industries and Heromotocorp. The fourth day opened higher and thereby traded with a negative and lethargic bias for the entire day. Infra and MNC sectors pushed the markets down. The fifth day too moved in the range but with intraday volatility.

One of the major reasons for the Indian stock markets to slip was lowering of Indian grade from stable to negative by S&P. India has been rated as BBB due to its slowing economic growth and investments and widening of current account deficit. The main concerns are the GAAR and oil price issues, which the government has assured to take care of. One of the solutions could be lesser import of Gold and coal by the country. With many other European nations still under the debt threat, US has shown a ray of hope. The US economy has been gradually improving with the growth in its employment, the housing data and thereby the corporate earnings. This proved to be great news for the US stock markets to close higher by breaking its three month high price bracket.
According to the latest updates, India is the second most confident economy in the world in terms of easing its inflation rate and the strict monetary policies. India ranks third in terms of purchasing power parity and also looking forward to accelerating growth too.

The Agricultural output data states that the food grains production this year has broken the all time high to 252 and a half million. Wheat and Rice are the major contributors. Moreover, the climate forecasts that India will experience normal monsoon this year as an icing on the cake for the agricultural sector.
We all are aware that the companies raise their capital requirements through equities. Recently the private equity players have entered the stock markets, which invest in the company at an early stage and exit through IPOs when others enter. Last year proved unlucky for IPOs and thus the private players could not exit, moreover, had to pay 20% capital gain tax too. Thus Government has decided to ease the tax rate up to 10% only for these private players.

Last week was a festive week for the gold buyers and thus many individual states experienced good amount of buying in the initial half of the week. To induce Bullion investors to buy gold, 6% discount was announced on gold coins across post offices. Overall week was optimistic for the gold markets. On the rupee front, the valuation has been degrading day-by-day and the analysts fear that the rate might cross 56 Rs/$ in the coming months.

What next….

The Nifty was range bound for the entire week, except for a fall in the beginning. The short term breakout/breakdown for the nifty is at 5235/5160 levels. The markets will give justified breakouts only above 5290 and below 5150 levels. Currently the stock markets are in the indecisive mode and the movement is totally dependent on the stock-specific quarterly results, the global economic news and the policy reforms. In the long-run, the Nifty is yet to give a penant like pattern breakout. The 200 day EMA support is at 5157 levels. The major support is at 5065 levels which if broken with justified volumes and other parameters can lead to another major fall for the Nifty. However, the positive trend is still intact.

From the fundamental terms, the stock specific quarterly results and the reaction of domestic investors and FIIs towards the S&P’s downgrading will decide the fate of the markets.