Expect the unexpected as volatility rules
Nifty closed above 8150, and is positive. It is likely to move up towards 8245 and 8249. If Nifty manages to close above these two levels with volumes, then we can expect further uptrend which can take Nifty towards 8500 or even 8900 in the short term. On the other hand, support for Nifty lies at 8043 and a decisive move below this could lead to a further fall in Nifty and it may test panic bottom at 7903. Major investors stayed on the sidelines because of the recent festive season and New Year, so we should not expect smooth uptrend in the market.
What is more, the India VIX is moving up slightly, suggesting that volatility will continue. Global cues are a trifle negative after the sharp rally in US equities markets, due to the overbought situation.
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Export oriented companies are going to benefit in the short run due to strong dollar index. IT and Pharma companies, especially large cap stocks, will be in focus this week. The Rupee is facing selling pressure due to heavy FII liquidation of positions in the cash market. Domestic institutional investors are supporting the market to a great extent. The large IPO issue of the National Stock Exchange will also drain the liquidity of the secondary market in the days to come. Metal stocks are also expected to support the market after recent technical correction. Metal index has support at 2594 and 2521. It has resistance at 2720 and 2746.
Eye on stocks
Banking stocks are still weak but it has already entered into oversold territory. Banking Nifty has support at 18000 and 17672. The immediate resistances are at 18328 and 18730. Selective banking stocks may lend support to the market. Manufacturing PMI, US FOMC minutes, continuing jobless claims, initial jobless claims, Markit composite PMI, Market service PMI, Balance of Trade, non-farm payroll, US unemployment rate and factory orders data is due this week. From the Euro side unemployment change, Market manufacturing PMI, inflation rate, unemployment change, consumer confidence, wholesale price YOY and Retail sales YOY are expected this week Indian data like Nikkei Manufacturing PMI, Foreign reserve, Industrial production, inflation rate and manufacturing PMI is due this week.
Dow Jones is bullish but it is slightly overbought and we can expect minor corrections in the days to come. Tensions between China and US are also cause for concern. US jobless claims declined by 10,000 to 265000 last week, which is positive. US trade deficit numbers were below street expectation and will keep the market nervous.
The yellow metal
Gold recovered smartly due to an oversold situation and conflicts between US and China. The dollar index was also traded lower, on concerns over conflicts between US and China. Gold has support at $1141 and $1115 per troy ounce. Gold has firm resistance at $1177. Technical charts suggest further upside to the yellow metal.
Alex K Mathews is the founder of www.thedailybrunch.com
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