Watch out for �
...Global cues and the Indian Rupee, which will determine the course of the week
The markets were extremely choppy and were driven by the movement of the Indian Rupee. On Wednesday, the Indian Rupee plummeted to Rs 56.40. The late evening announcement of the steep petrol price hike by Rs 7.50 saw the markets rallying on Thursday. The price hike made the markets believe that the much needed diesel hike was finally going to happen, but once again on some flimsy ground, it has been postponed. The reluctance of the Government to increase prices and reduce the fiscal deficit is affecting the Rupee and the markets.
The markets last week were extremely choppy. We had a bad Wednesday and a good Thursday. The markets were able to eke out a small gain after four consecutive weekly losses. The BSESENSEX gained 65.07 points or 0.40 per cent to close at 16,217.82 points. The NSENIFTY gained 28.95 points or 0.59 per cent to close at 4,920.40 points. The broader indices like the BSE100, BSE200 and BSE500 gained similarly at 0.55 per cent, 0.49 per cent and 0.51 per cent respectively. The BSEMIDCAP index gained 0.61 per cent while the BSESMALLCAP was a big gainer up 1.01 per cent. The sectoral gainers were led by BSECAPGOODS, which rose 1.67 per cent, BSEBANKEX up 1.61 per cent and BSEOIL up 1.5 per cent. BSEFMCG was down 2.28 per cent in a week when almost everything was marginally up. In individual stocks Axis Bank gained 5.48 per cent, Tata Motors gained 3.56 per cent, ONGC up 3.36 per cent and SBI 3.24 per cent. The losers included Sesa Goa down 6.01 per cent, Maruti down 4.12 per cent, Sterlite down 4.11 per cent and ITC down 3.11 per cent. The Indian Rupee weakened further to Rs 55.37 to the US Dollar on Friday. The low for the previous week was Rs 56.40 and the recovery was on account of the steep petrol price hike. FIIs continued their selling spree and sold shares worth Rs 1,268 crore, while domestic institutions continued to be buyers with purchases of Rs 810 crore.
Global cues have also weakened and markets around the world have become listless. Concerns on account of the Eurozone crisis have taken centrestage. The result season would come to an end in a week’s time. The summary of results shows that sales growth is slowing down and the margins have been impacted, reducing the operating margins and therefore net profit. Going ahead the key would be to increase the sales momentum and prevent the same from turning negative. Facebook, which listed on May11 on NASDAQ, is having a torrid time. There have been atleast two class action suits filed against the company, which set the world and the market blazing with a market cap of $104 billion at issue price of $38. The stock closed at $31.91, down $6.09 or 16.02 per cent over the issue price. The share was at frenzy and the price clearly seems unsustainable having a PE multiple in excess of 100 times. The week ahead would see futures for May series expire on Thursday, May 31. The level of the previous series April expiry was 5,189 points. This sharp fall of 269 points could see some recovery in the next four days. The markets in the last week’s fall have tested key support levels at 15,850. In the previous week it had touched a level of 15,809. On the NIFTY, similar levels tested were 4,804 and 4,789. These levels will become very crucial in the coming weeks and failure to hold these levels could see a sharp sell off. The week ahead is likely to see the listing of Speciality Restaurants on Friday, June 1. The issue was subscribed on the back of support of QIBs and partly from HNIs. The retail portion remained undersubscribed and the issue has been priced at Rs 150.
The markets are oversold and there could be some more technical pullback. Global cues and the Indian Rupee would determine the course of the week. The BSESENSEX has support at 16,132 points, then at 15,975 points, then at 15,815 points and finally at 15,655 points. It has resistance at 16,288 points, then at 16,442 points, then at 16,668 points and finally at 16,861 points. The NSENIFTY has support at 4,894 points, then at 4,848 points, then at 4,805 points and finally at 4,756 points. It has resistance at 4,941 points, then at 4,985 points, then at 5,037 points and finally at 5,078 points.
Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website http://ak57.in
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