Mood subdued

Markets lost all the gains made on Diwali day

The equity markets were negative and subdued during last week with markets losing all the gains made on Diwali day. The Diwali gift that the markets got was a drastic upmove, which took it past previous all-time highs.

The money released from the Coal India IPO refund after November 3 also fuelled the Diwali jump. One of the notable announcements was the lifting of some US curbs on exports of sensitive technology to India.

Resistance
New FPO Powergrid was subscribed around 14.50 times by close. Investors were shown good interest as they were getting a five per cent discount. The price band is fixed at 85-90 and the current price of the stock is around 100.


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In the coming months, we are going to see more FPOs and IPOs, which will limit the market from making another major upside. Diwali dhamaka and the quarterly numbers are over for now and so expect a sideways to negative trend in the coming days.

This is further confirmed by the weaker than expected IIP data, which caused a heavy sell off on Friday. Nifty has immediate minor support at 6020 and 5937. Movements below these levels can cause more selling.u00a0 The resistance for the Nifty will be at 6210 and 6244.

Cues
Asian markets were in negative mode most of the time on speculation that China may force its banks to hold more foreign exchange to put a control over fund inflows. But during the week, China posted trade surplus of $27.1 billion in October, which was larger than the estimated figure.

Higher Chinese inflation figures caused panic selling in the South East Asian countries, which was further fuelled by the weak economic cues from Ireland and Greece.u00a0 Banking and Realty stocks across the globe are trading lower, it has sent weak cues to domestic markets too.

Axis Bank and ICICI Banks are also expected to fall further. Short-term bear operators can create short positions at these counters. Investors with long-term perspectives can buy these stocks at every decline in a phased manner.

Forecast
The European markets witnessed a mixed trend as some of the corporate majors like Vodafone came with good earnings numbers while some others posted earnings below the estimates. On the other hand, disappointing forecasts from Cisco Systems caused heavy selling in the IT sector as a whole.

Major front line IT stocks are expected to trade lower, but lower side support is expected.u00a0 Investors can buy Infosys and TCS if there is more than three per cent correction in the near term.u00a0 Investment buying can be considered in Coal India, which is trading at Rs 320, has very strong support at Rs 311 and Rs 302. Price declines can be utilised to buy the stock.

Depreciate
United States as well as China is artificially letting their currency depreciate making their exports valuable leading to lower trade deficit. This act has helped US to reduce the trade deficit and China to increase the trade surplus respectively.u00a0

But other small nations are facing problems relating to domestic currency appreciation, which may hamper their exports. Most of these economies are facing current account deficit balance, which directly translates to a weak economy.

Fell
Base metals witnessed some profit taking at the beginning of the last week with Copper prices slipping on news that China may reduce their copper imports as prices were sky rocketing and increasing supplies. Aluminum saw some early weak trend on news that China sold almost 100000 tons aluminum stockpiles at below market price. On Friday, Euro fell against the dollar and caused heavy sell off in precious metals and base metals.u00a0

Gold may face resistance at $ 1415.u00a0 Metal stocks like Tisco, Hindalco, Sterlite and Jindal Steel may face more selling.u00a0u00a0Alex 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 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. Any reader taking decisions based on any information published here does so entirely at his or her risk.