Approach with caution

Published: Nov 05, 2012, 07:24 IST | Arun Kejriwal |

While Hurricane Sandy adversely affected the markets last week, investors should watch out for the effect the US presidential elections and Diwali will have on the markets in the coming two weeks

Markets were nervous ahead of RBI policy on Monday and remained flat. Tuesday saw RBI reducing CRR by 25 basis points on expected lines and kept other rates unchanged. The market did not like this and it fell quite sharply. It recovered thereafter and Friday saw a sharp jump on account of Asian markets which saw strong rallies. The BSESENSEX gained 130.11 points or 0.70 per cent to close at 18,755.45 points, while the NIFTY gained 33.40 points or 0.59 per cent to close at 5,697.70 points. The broader indices like the BSE500, BSE200 and BSE100 gained 0.73 per cent, 0.76 per cent and 0.76 per cent, while the BSEMIDCAP gained 0.64 per cent and the BSESMALLCAP lost 0.31 per cent.

New York Stock Exchange
Reboot: Traders work on the floor of the New York Stock Exchange in New York City on October 31, 2012, the first day of opening after Hurricane Sandy hit the east coast of USA and caused trading to be stopped for two whole days. The markets lost 14 points due to Sandy. Forecasting firm Eqecat predicted that the cost of the damage could be between USD 30 billion and 50 billion. Pic/AFP

The markets were mixed with some sectors gaining and others losing. The top sectoral gainers included BSEAUTO (up 3.90 per cent), BSEHEALTH (up 3.16 per cent), BSEIT (up 2.43 per cent) and BSEMETAL (up 1.07 per cent). The losing indices were BSECAPITAL (down 1.89 per cent), BSEFMCG (down 0.70 per cent) and BSEBANK (down 0.41 per cent). In individual stocks there were quite a few big gainers on impressive quarterly results which included Titan (up 8.75 per cent), Wipro (up 8.57 per cent), Union Bank (up 8.40 per cent), Maruti Suzuki (up 7.32 per cent) and J&K Bank (up 6.79 per cent). The losers included BHEL (down 5.41 per cent), Bharat Petroleum (down 3.33 per cent) and ONGC (down 3.22 per cent).

Sandy effect
The US east coast was struck by Hurricane Sandy while Cyclone Nilam struck Tamil Nadu and Andhra Pradesh. US markets were closed for two days while in India not much damage was reported. The storm in TN and AP brought a lot of rain with it, which is expected to be of help for the oncoming sowing season. US markets remained flat in a three-day week and lost a mere 14 points.

FIIs were buyers once again and bought stock worth Rs 886 crore during the week while domestic institutions were net sellers of R536 crore. FIIs bought a total of Rs 10,272 crore in October 2012 which was half of what they bought in September at Rs 20,769 crore. Domestic institutions sold a total of R2,550 crore in October which was lower than the Rs 3,200 crore sold in September. The Indian rupee depreciated to close at R53.81 against the previous week’s close of Rs 53.56 to the dollar.

Game changers
The US elects its President on November 6 and it is a very close call as to who would win. This would be an important event for the world markets and they would wait for these results. In India, we have crucial results from important sectors in the week ahead , especially from giants like SBI, Tata Steel, ONGC and Coal India. There would be a host of other results which would affect the markets on a stock specific basis.

The festival of Diwali is almost here and Dhanteras would be celebrated this Sunday. The market observes a holiday on Tuesday and Wednesday in the following week and one should expect profit booking on account of positions being liquidated as the week progresses. The markets have been in a range bound manner for almost a month now and the lows made this week were new lows for the month. The rally from Wednesday’s low is 350 points on the SENSEX and 115 points on the NIFTY. The markets need to break out of the range if the momentum has to continue. The key levels are 18,925 and 18,525 on the SENSEX and 5,755 and 5,640 on the NIFTY. The markets need to break these levels on the upside and sustain them for any meaningful rally to happen.

Good news
The last week saw some positive development in the core sector which grew significantly. These numbers would make one believe that the slowdown in the economy is certainly coming to an end and probably the worst is behind us. One hopes this is a reality and that figures do not get revised downwards in the next month. Assuming these numbers remain unaltered, this is cheerful news for the economy.

The BSESENSEX has support at 18,697 points, then at 18,591 points, then at 18,501 points and finally at 18,393 points. It has resistance at 18,803 points, then at 18,905 points, then at 19,135 points and finally at 19,301 points. The NSENIFTY has support at 5,683 points, then at 5,654 points, then at 5,616 points and finally at 5,555 points. It has resistance at 5,711 points, then at 5,742 points, then at 5,795 points and finally at 5,835 points. The week ahead would be a traders’ delight with sharp two-sided movements available. Trade cautiously.

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

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 is 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. 

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