Indices zoom and buoyancy is the mood of the moment
Prime Minister Narendra Modi shakes hands with the new Chief Minister of Uttar Pradesh Yogi Adityanath during the swearing-in ceremony in Lucknow. Pic/AFP/PIB
The Nifty and Sensex made new highs after the stunning performance by the Bharatiya Janata Party (BJP) in the state elections. The US Fed decision to increase interest rate from .75 per cent to 1 per cent and market participant's reaction indicates that they interpreted Federal Reserve's statement as more dovish than expected and early implementation of GST.
Both S&P 500 VIX and India VIX, which measures US market conditions and Indian market sentiments, suggesting further uptrend because of decline in VIX at 11.28 and 11.85 respectively. The momentum indicator of Nifty suggesting deterioration of the swing, but weekly and monthly momentums are still positive. We can expect minor technical correction in the form of sideways movements before breaking the 9200 mark.
As both indices are at all time highs, one can expect a sharp break out rally once Nifty breaches the 9200 mark. Nifty has support at 8972 and 8799. The latest corporate advance tax numbers are suggesting marginal uptick in the payments.
Out of 100 prominent companies, advance tax payment numbers which reported last week were higher by around 6 per cent, compared with previous quarters. The advance tax numbers are likely to play a crucial role in the direction of the market.
Banking Nifty is still in sideways movement, major technical indicators still suggest lack of positive triggers. Maybe we can expect a breakout week ahead of futures and options expiry. Nifty has support at 21075 and 20873. Resistances for Banking Nifty lies at 21427 and 21450. It is prudent not to create fresh long positions at the beginning of the week. Price corrections can be utilised to buy private sector banks.
Metal stocks recovered from the lower levels in the past, but the steel sector stocks would remain weak due to higher production from China. China is the largest producer and consumer of steel, but recent export restrictions will keep the metal prices under check. Nifty Metal Index has support at 3111 and 2071. Resistances for the Metal Index are at 3201 and 3281. Sectors like telecom, cement and pharma will remain lacklustre. Nifty IT index already reached its short term target, if IT Index can breach the resistance at 10982, then it could test 12054. Many frontline IT companies are on a buy back spree will keep the upward trend at this sector. Support for the IT index lies at 10788 and 10724.
Macro data from US continuing jobless claims, initial jobless claims, US market composite PMI and US Market Service PMI flash and unemployment rate and industrial production, balance of trade, current account and consumer confidence from Euro zone is expected this week. Dow Jones even though on the overbought zone, is trading at a multi decade high and will keep upward momentum intact.
Dow Jones has resistance at 21065 and 21500. Support for Dow lines is at 20771 and 20690. As the macroeconomic data is better than expected it is advisable to take long positions at every correction.
Alex K Mathews is the founder of www.thedailybrunch.com