Stock specific movements

Nifty Out Look

It was RBI last week and ECB this time. Nifty went up smartly on all the five days to close with a gain of about 3.50 per cent.

With a signal of reversal of interest rate cycle and global liquidity too set to improve because of QE by ECB, positive outlook was found in the market. High FII interest is driving our market with huge liquidity. Advance decline ratio is not positive last week despite huge run up in indices. However, in view of the overbought situation, a reasonable retracement can be expected.

US President visit outcome (in terms of economic agenda), Greece Election Outcome, next RBI Policy on 3rd February and the Budget proposals towards February end are the major events to observe. Besides the ultimately revival of corporate earnings is the key. The government is expected to make a pack of announcements and path breaking measures to which the stock markets have already discounted.

Once GST becomes realty, most of the bottlenecks in interstate trade would be removed and there would be ease of doing business with proposed changes and would attract consider investment into the country and would further drive the markets.

However, there would be a lag between effort and the results and once corporate results improve confidence would further raise. Market is expected to remain bullish with better government finances, stable currency and strong corporate earnings.

In the month of January market movement would be driven by Q3 results, funds flows, reform measures rupee and crude movement besides Geo political factors.

As first full budget of the new government is just six weeks away, optimism expected and a pre-budget rally appears to have begun. Infra, power, housing sectors may be expected to take benefit from the budget. Q3 results of most of the banks are seen better, in view of the treasury profits. Depreciating rupee could benefit export sectors such as IT and Pharma. All in all, the strategy will be “Buy on Decline” for the time being.

20 DMA, 50 DMA, 100 DMA and 200 DMA are placed at about 8405, 8385, 8225 and 7785 respectively and would act as supports / resistances. Nifty is above all averages. Nifty continues to be above 200 DMA and 50 DMA too is above 200 DMA suggesting that the long term bullish trend is intact. Strong long term support would be around 7800 level and Medium term support is 8200.

For the coming week, Nifty spot is expected to face resistance at 8930, 9025, 9120 and find support at 8740, 8650, 8555. Minor resistances may be found at 8940, 9020, 9065, 9145 and minor supports at 8730, 8650, 8600, 8525. Nifty is presently bullish would become bearish only on a close below 8675. Breakout level for the week is 8950, and break down level for the week is 8445. Nifty becomes further bullish only if it continuous trades above 8950, which could be difficult considering the smart rise of last two weeks.

Advice for Traders
Nifty rose sharply due to huge FII interest and positive global cues. However, caution is advised at higher levels in view of the overbought position. Stock specific movements can be expected in view of the derivative expiry. Breakout levels of 8950 could act as a major resistance. However, Nifty would become bearish only if it trades below 8675.

By: Dr B A Sastry