Technical rebound from 5400 took Nifty towards the 5700 level last week, marking the return of the FIIs. Foreign institutions were net sellers in the last couple of months but the figures from SEBI showed that they have bought back half the shares they had sold in May 2011
Technical rebound from 5400 took Nifty towards the 5700 level last week, marking the return of the FIIs. Foreign institutions were net sellers in the last couple of months but the figures from SEBI showed that they have bought back half the shares they had sold in May 2011.
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The Western Express highway near Malad (E) blocked by activists to protest against hike in fuel prices
We had many positive international cues, which lend further support to our markets. The easing of the European debt crisis, crude price falling near to $90 and global economic data added to the positive sentiment.
Investors
Nifty is overbought with the seven-day RSI at 75 and a profit taking is pending from these levels. It has been a continuous journey for Nifty from 5400 to 5700 without a correction. Nifty has to come down towards 5468 on technical grounds, from where we may see a reversal. In between, Nifty has support at 5546 and 5519 while the resistance is at 5705 and 5749 (200 DMA).
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From this week onwards we are going to see the Q1 results pouring in from July 8. Investors should book profits at around 5750 levels. Re-entry can be considered only at lower levels at 5610 and 5546 levels. Option traders can make long Nifty Straddles by buying Nifty 5600 Call options and Put Options together. On the stock side, Bata India, DLF, L&T, Venky's India are looking very strong and can be bought for a medium term perspective.
Saving
Late last week, the government had raised the diesel prices by around Rs 3/ltr, kerosene by Rs 2/ltr and Rs 50/cylinder for LPG adding more pressure on the common man's kitty. Recently, we heard the Prime Minister say that the country is holding on to its saving rate of 34 per cent to 35 per centu00a0 compared to the previous years figures, but the rising product cost will certainly impact the savings percentage.u00a0
Deficit
Trade data showed that the exports in May rose an annual 56.9 per cent to $25.9 billion while the imports rose 54.1 per cent to $40.91 billion widening the trade deficit to $15 billion, which is the highest since September 2008.
One should also keep in mind that the government had recently abolished the 5 per cent customs duty on crude oil imports, which will affect the income of the country. Also the country's manufacturing sector did not have a good time in June as the June manufacturing PMI fell to 55.3 from 57.5 in May.
Positive
During last week we saw food inflation numbers, which declined sharply towards 7.78 per cent from 9.13 per cent. This decline in food inflation cannot be taken as an emerging positive trend, as the recent diesel price hike and the resulting increase in transportation costs has not been taken into account.
The monsoon has eased the price pressure a bit in major producing states but the rainfall was not as expected and slightly below normal. Going forward, at least in the near term, we may have to live with high inflation as a rise in commodity price is partly due to the speculative element.
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For all the debris to settle down and see a steady decline in inflation, the commodity price has to come down. Gold is likely to trade lower in the range of $ 1519 - $ 1470.
Attractive
The global scene was very attractive with the European debt crisis easing after the Greek government won the vote in favour of the Euro 28 billion austerity measures supported by European Union and the IMF. It had also won the vote the second time, after the lawmakers backed a bill to authorize an austerity plan.
This helped the concerns of a default to ease and was cheered by global markets.
Towards the end of the week, also, the initial jobless claims fell to 428000 from 429000 along with consumer confidence declining at a slower pace than expected.
The author may have a vested interest in investments he has recommended. Feel free to e-mail him at alex@geojit.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever.
All matter published here isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here.
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