No pain, all gain

Feb 06, 2017, 10:49 IST | Alex K Mathews

Reactions bring cheer all around

Finance Minister Arun Jaitley with MoS for Finance and Corporate Affairs, Arjun Ram Meghwal and senior officials during the Post Budget interactive session with industry associations in New Delhi. Pic/PTI
Finance Minister Arun Jaitley with MoS for Finance and Corporate Affairs, Arjun Ram Meghwal and senior officials during the Post Budget interactive session with industry associations in New Delhi. Pic/PTI

On February 1, Nifty gained nearly 1.81 per cent after the budget presentation. Domestic and foreign investors supported the market and finally on Friday, Nifty closed above 8759.25. The outlook of the market is positive and it is likely to test 8825 and 8930 in the short term and 9071 in the medium term. Nifty has support at 8697 and 8636. India VIX moved down below 15 and closed at 13.1275 on Friday, indicative of a strong undercurrent in the markets. As expected, Nifty bank also outperformed the general market and it closed at 20196. It is likely to move up further 20396 and it has support at 19900 and 19714. RBI interest rate decision will give further direction to the banking nifty.

Boost sentiment
As the banks are flooded with deposits there are possibilities of a rate cut this week, during the RBI policy meeting which can further boost the sentiments towards banking stocks. We can expect fresh buying in infrastructure, housing, housing finance, tea manufactures, automobile, FMCG, cement, banking, telecom and steel sectors. Caution should be taken while selecting stocks, do not compromise on the quality of the companies while investing in these sector stocks.

The Nifty IT index is showing minor recovery but is yet to enter into bullish orbit, it has resistance at 3215 and support at 3043. So, it is prudent to stay on the sidelines in this sector, till further cues on US HBN1 visa policy initiatives. The Nifty metal index is currently placed in the overbought territory, which can cause partial profit booking.

Looking good
The Dow Jones is looking bullish and it is likely to test 20691 and has support at 19700. US Federal Reserve has not mentioned anything about the next rate hike, so it is positive news for the DOW. The latest data on US non- farm payroll increased by 22,7000 in January, higher than market expectation and it was even better than the December data of 175000. The market concern is about the bilateral relationship between Iran and US; relations between the two countries are deteriorating everyday after Tehran’s missile programme. The US administration threatened to impose sanctions if Tehran continues with its missile test.

This week, a lot of companies will come out with its quarterly earnings like BHEL, Blue dart, CEAT, EID-PARRY, GATI, GILLETTE, Hexaware, MRPL, PNB, Tata Steel, titan, Bharat Forge, CIPLA, Hero Motor, IGL, NTPC, Siemens, Tata Chem, UBL, ABB, Aurobindo Pharma, BPCL, Cairn, Escorts, ICRA, LUPIN, SAIL, BEML, GAIL, M&M, SBIN and Tata Power.

Geo-political tension
On the macro front, the US Balance of Trade, Continuing Jobless Claim and initial jobless claims data’s are due from US. Industrial Production, Manufacturing Production, Cash Reserve Ratio and RBI interest rate decision will give further direction to our markets. From EURO zone inflation, factory orders, retail sales, balance of trade and industrial production data are from Euro Zone will come out.

Crude oil recovered from lower levels on geo-political tensions between Iran and US, despite higher inventories in US. Going forward, if US impose new sanctions on Iran they could support the crude oil market in a big way. Crude has resistance at $54.22 per barrel and it has support at $52.20 per barrel. Any decisive move above $55 will take crude prices towards $60 per barrel. A sudden spurt in crude will be negative for the global markets.

Alex K Mathews is the founder of www.thedailybrunch.com

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