Nervous last lap

Expect a strong opening after some trepidation in the tail end of last week

Markets showed some nervousness on the last trading days of the week. They closed at 8323. We can expect a positive opening today, because of strong closing of US markets after US job growth data. The non-farm payroll increased by 2,87,000 jobs last month, the largest gain since last October. Nifty has resistance at 8401 and 8450, if these two levels have been take off, then we can expect even 8500 level soon. Nifty has support at 8280 and 8217. Price declines can be utilised to buy equities, especially large cap stocks, for a medium term.

A mob forms a heart with stars representing the EU on the Brexit vote in SW England. Pic/ AFP
A mob forms a heart with stars representing the EU on the Brexit vote in SW England. Pic/ AFP

Beginning
The Govt starts the process for sale of Specified Undertaking of Unit Trust of India (SUUTI). These shares are worth approximately Rs 60,000 crore. This amount will enable the Govt. to achieve the disinvestment target. SUUTI includes nearly 43 listed companies. Direct and indirect tax collections in the first quarter of the current fiscal, have swelled up to over 3.23 lakh crore.

There are reports that when promoters have pledged share value increases in the recent past, it is an early warning of companies in trouble. The study shows that promoter’s pledge of company holding rose to 81 per cent in FY 15, from an average of 30 per cent in FY11.

Cement, Metal, Banks, Auto Mobile and Pharma stocks are likely to move up in the short term. IT sector stocks may remain subdued, may be able to bounce back on Tuesday due to the over sold situation.

Challenges
Rating agency Moody’s said that our economic growth will be challenged over two years, by slow growth of world economies and highly leveraged portfolios of large corporates. On the other hand, they are very confident that the UK’s decision, to vote to leave EU, will not have a huge impact on the Indian economy because our exports to UK accounts for mere 0.4 per cent of India’s GDP. Exports from our country to EU are at around 1.7 per cent of India’s GDP.

The latest Chinese Service PMI rose to an 11-month high of 52.70 from 51.2 in May. The June Federal Reserve policy meet confirmed that they may keep interest rates unchanged for some more time, helping to gain investors confidence in equity markets.

Gold
Japanese investors are accumulating gold because of negative interest rates in Japan, and fear that the Yen will depreciate. Even Chinese investors are betting heavily on gold because of global currency volatility. UK and Euro Zone investors are also investing heavily in the yellow metal on fear of uncertainties over BREXIT. On Friday, gold moved up sharply from the lower level after better than estimated US job data. Gold has resistances at $1365 and $1380 per troy ounce. Gold has support at $1350 and $1335 per troy ounce.

Crude
Crude came off from highs on a report of oil services firm Baker Hughes, that U.S. oil rigs rose by 10 to 351 for the week ending on July 1. This provides some signals that dormant shale producers in the US may be ramping up output. Crude has immediate support at $44 per barrel, and $43,49 per barrel. It has resistance at $49.86 and $50.50 per barrel. The commodity has already entered in the oversold region and is likely to bounce back from lower levels.

Data
The monsoon session of Parliament will commence next week. If there is positive consensus to implement the GST, then it will act as a catalyst. World economic data like Japanese inflation rate, balance of trade, GDP growth rate, initial jobless claim, and other aspects is expected this week.

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