Last week gave a dynamic turn to the so called lethargic and range-bound stock markets. We had talked of the trendline breakout for the target of 5800 levels and nifty thereby crossed 5885. The stock markets opened on a positive note but traded lethargically for the entire day to close flat. IT sector specifically Wipro performed the best while M&M was held responsible to drag the markets a bit downwards. The second day opened lower and was pulled upwards by the Realty sector to close higher by 1.62%. After a festive gap of one day nifty again opened lower on the fourth day where almost all NSE India & BSE India sectors traded with a positive bias. Only Infosys could not beat nifty. The fourth day gave a trendline breakout and hence it was expected that the week ending would be bullish. Last day the Metal sector supported nifty to heave further up to 5885 levels.
Last month the country broke the trade deficit record of USD 21 Billion. The country has a trade deficit with 48 countries out of which China ranks first. India has been consistently in demand of oil and gold imports. However, the lower industrial output except for Garment & Textile industry and overall weak global market scenario specifically Eurozone crisis, the country is unable to bridge the gap between increasing imports and declining exports.
- The major way out to the same is the divestment policy adopted by the Government. To start with, its first target was Hindustan Copper.
- Another way out is to solve the 2G spectrum issue and to recover the huge losses faced at macro levels.
- One more prompt solution to bring in liquidity is to get all the loans recovered by PSU banks. FM asks all these banks to start with the bad loan recovery process and get atleast 20% before the next budget is put forth.
Growth rate would also record a three year low due to the lower industrial output due to the lethargic growth in the industry allied sectors viz; Power and Trade. India will experience a dip of up to 5.1% GDP this year. Moreover, India recorded highest inflation rate as compared to other BRICS nations due to lower supply, lower monsoon & poor storage facilities. The inflation has not only affected the luxurious goods sector but also dampened the basic necessities. This would lead to widening the equitable distribution gap.
Our first mentioned target for nifty at 5800 levels has been achieved. Infact nifty has crossed the resistance level at 5800. After this dynamic turn, we expect a bit of correction of up to 5720-5750 levels. To support the oscillators have already reached the over-bought zone. However, the weekly chart is still positive with rising volumes and oscillators positive crossover. So we can expect a further upward jump of up to 6000 levels in the first place.
The FDI issue is yet to be resolved. The final voting and verdict of the political parties will decide the fate of FDI in multi brand retail. Moreover, the analysts expect the markets to be illiquid till the end of the year. So book profits and cover losses beforehand.
Stock Market opened on a positive note and recorded a 2% upward move on the same day itself. The second trading session experienced a gap-up opening but was ultimately pushed down to close flat, due to a fall in the IT sector. On the contrary, the IT sector specifically Infosys and Banking sector were at the forefront on the third day to pull the stock markets up; one of the major reasons being good Quarter 2 results for Infosys. The fourth day opened higher but closed negative as a result of the collective poor performance by Auto, Infra and Pharma. The last day opened lower and traded positive with all sectors positive, but Realty. In short the stock markets rallied for the entire week to close higher by 5%.
IMF, EU and ECB have given a green signal for providing aid of up to 8 Billion to Greece by early November. This would be possible with the joint efforts of Private sector and Official sector to some extent. Following the footsteps of the Greece, S&P last week announced the Spain’s downgrading to AA-. Spain is forced to rely on deficit financing and is expected to add to its yield through Government bonds to provoke investors. Now all the other Euro zone countries are striving for their own solvency issues.
To change the investor sentiments and increase the free flow of foreign currency, Government, specifically Anand Sharma, the Union Cabinet Minister for Commerce and Industry, has taken initiative to allow up to 51% FDI stake in single brand retail businesses in India. For this the Government is likely to lower the tariff barriers.
On one side the borrowers are concerned about the constant interest rate hikes that the RBI is undertaking after every major event and on the other side RBI is thinking of its final rate hike of 25bps even though the IIP data has come to 4.1% as against 3.3% last time. Moreover, the inflation is almost near to a double digit and Food price index also rose to 9.35% and fuel price index to 15.10%. So unless the prices ease out the RBI would not change its word. Contradictorily the central banks have cut their interest rates to welcome more demand.
The gold market was range bound for the entire week due to the recovery in the equity markets. However, on Friday it climbed a bit with a change in the investor focus to the bullion markets. The Gold is likely to make record highs next year as the long term buyers like ETFs and Central banks have entered the Bullion markets.
Last week was highly optimistic but we are yet to come out of the consolidation phase. The stock markets are still range bound and thereby indecisive. The Nifty has given a 3&8 EMA positive crossovers along with stochastic crossover with rising volumes. We can expect some more positivity up to 5300-5350 levels if the immediate resistance at 5170-5200 is broken. On the daily charts either we can expect a bit of correction as the nifty has arrived at the resistance level or it might act as a breather for the next positive rally. We also have few major company results to be announced this week and thereby expect stock specific volatility in the markets.
So let’s hope for the best…….