Last Thursday, markets moved up on news that the Federal Reserve would not trim its stimulus programme until it gets a clear picture on unemployment and economy. The day after on Friday, the RBI governor increased the CRR by 25 basis points which was a surprise and reduced marginal standing facility by 75 basis points, which may lead to an increase in lending rates by the banking sector. We saw heavy bull liquidation and on that Friday evening, Banking Nifty closed lower below 4 per cent. Going forward, we can expect some more buying interest, ahead of F&O expiry on Thursday, September 26. Nifty has support at 5932 and 5915, below this; it may find support at 5840 (200 Day Moving Average). In the North it has resistance at 6050, 6165 and 6195.
Investors with appetites for high risks can buy 5900 call options. The risk averse can buy 6000 Call options of Nifty and 5800 Put options of Nifty together. Investors can also write 6200 Call options in the October series and can buy 5800 Put options together. Gold is weak and it is likely to remain so. It may find support at $1310 and $1302 levels. It has resistance at $1357 and $1371. Low-level value buying is expected in yellow metal.
Crude is also weak, and it is likely to test $103.60 and $102. Crude has resistance at $106.25 in the near term. The major reason for the decline in crude price was because of fading the fear of an intervention by U.S in Syria. Possible discussion between U. S President and Iranian Premiere is also a key reason for the decline in crude price.
Coal India has put off a three-day strike from September 23 to December, after a meeting with company officials. The company's five trade unions had earlier served a strike notice, mainly to protest against the Govt. plan to sell off five percent stake of the company. Today, one can expect sharp rise in stock price. On Monday and Thursday we can expect selective buying in banking stocks ahead of the F&O expiry. Counters like HUL, DLF, Reliance Industries and Tata Steel are expected to remain weak.
Individual counters like Britannia, VA TECH , Pidilite Industries, Dr. Reddy, Natco Pharma and Elder Pharma are likely to remain firm in the coming days, so these stocks serve short term investment purpose. Investors can expect 10 to 25 per cent returns in the short term.
In a surprise announcement the Saint Louis Federal presidents said that Fed might start tapering the stimulus in the next month; Silver tumbled 5 per cent and platinum and palladium also declined nearly more than two per cent. We can expect selling pressure on metals stocks on Monday, especially in Sesa Goa and Hindalco.
Investors with medium term views can buy Natco Pharma and Elder Pharma at the current levels; both these stocks are expected to outperform. The next major triggers for the markets in the near term are quarterly results, IIP data and inflation data.
Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill. He is also the technical and derivatives research head of Geojit BNP Paribas Financial Services Ltd. The author may have a vested interest in investments he has recommended. Feel free to e-mail him at email@example.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
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