Sharp gains are reason for cheer and there are more positives ahead

The markets had a great week, and have overcome stiff technical resistance in the course of last week. Markets in three days, have registered sharp gains across sectors, to reach their highest levels in 2016. The BSE SENSEX gained a whopping 1,351.70 points or 5.34 per cent, to close at 26,653.60 points. NIFTY gained 406.95 points or 5.25 per cent to close at 8,156.65 points. The broader markets saw the BSE100, BSE200 and BSE500 gain 5.04 per cent, 4.66 per cent and 4.34 per cent while BSEMIDCAP and BSESMALLCAP were up 2.94 per cent and 1.34 per cent respectively.

Anti-Donald Trump protesters are threatened with pepper spray by a Trump supporter outside Republican presidential candidate Donald Trump’s election rally event in San Diego, California, on May 27, 2016. Thousands of pro- and anti-Donald Trump demonstrators faced off outside a rally for the presumptive Republican presidential nominee in San Diego. Pic/ AFPAnti-Donald Trump protesters are threatened with pepper spray by a Trump supporter outside Republican presidential candidate Donald Trump’s election rally event in San Diego, California, on May 27, 2016. Thousands of pro- and anti-Donald Trump demonstrators faced off outside a rally for the presumptive Republican presidential nominee in San Diego. Pic/ AFP

The top sectoral gainer was BSE CAPGOOD up 11.19 per cent, followed by BSE BANKEX 6.46 per cent and BSE FMCG 5.50 per cent. So strong and across the board was the rally that there were no sectoral losers. The sector to gain the least was BSE CONDUR up 0.72 per cent. In individual stocks, Larsen and Toubro was the top gainer up 17.25 per cent, followed by State Bank of India 14.06 per cent. Other stocks to gain were ICICI Bank 10.43 per cent, ITC up 8.94 per cent and SAIL 7.70 per cent. The losers were hardly there but Cipla lost 6.62 per cent followed by Lupin 1.59 per cent.

The oil marketing stocks, produced excellent results and HPCL gained 12.03 per cent followed by BPCL 9.77 per cent. Indian Oil had comparatively speaking, poorer results and gained a mere 1.22 per cent. It has been a long time since one saw PSU companies reporting an EPS of Rs 140 plus, as was done by HPCL.

May series futures expired on a positive note at 8,069.65 points, a gain of 222.40 points or 2.83 per cent over the April series close. This time, the bulls had a surprise element in the monsoon forecast being upped to 109 per cent of the average just before the expiry. This enabled the markets to break out of the resistance zone and trap short sellers on the last day. Friday being the first day of a new settlement, saw the market take a fancy to some of the results particularly SBI, and, markets rallied strongly for the third consecutive day.

Eye on US
Dow Jones had a positive week and gained 372.28 points or 2.13 per cent. The primaries for the US election are almost done, and, we are coming to the end of the same. It appears that the contest would be between Donald Trump and Hilary Clinton. The big difference in the primaries is that we are seeing a lot of violence in the elections. Such things do not augur well for any nation and irrespective of who wins, there would have to be lot of patching up to do once the elections are over.

The Indian rupee gained 41 paisa or 0.61 per cent to close at Rs 67.03. The rupee has been quite volatile and moving in both directions.

Results season is coming to an end, and, we have a host of companies declaring results today and Tuesday. There are a few green shoots visible, but above all it is the expectation of a better than normal monsoon is driving the market.

The second is the political equation where it now appears that GST may become a reality. These two factors have rallied the market significantly and brought it out of a congestion zone. Going forward, the resistance of 7980 on the NIFTY would now act as a strong support on any declines.

Lull before storm
The primary market is currently quiet, and this could be the lull before the storm. There is a big pipeline of issues waiting to tap the markets. What could be the trigger for them is probably the monsoon hitting the coast of Kerala. We all know that once the issues start, they come one following the other, and this time should be no different. One only hopes that promoters and merchant bankers price the issue reasonably, as there is appetite for fresh paper.

There is renewed vigour in the markets, it seems, as some fresh money has been infused. The drivers are the monsoon, and things look good so far. Expect some consolidation this week, after a spectacular run last week. It may also happen that the markets may remain where they are, but different stocks move in this week, compared to those that moved last week. Take some money off the table if you are a short term trader, and have made money last week.

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