Dial D for Delicate

Apr 09, 2012, 07:40 IST | Arun Kejriwal

Markets stand precariously poised as we go into this week

The markets behaved as expected and rallied for the first two days before profit taking on the third day of a short week, which saw the markets surrendering more than half the gains. The markets closed with small gains for the week, and are now very delicately poised technically. The BSE SENSEX gained 81.82 points or 0.47 per cent to close at 17,486.02 points. The NSE NIFTY gained 27.35 points or 0.52 per cent, to close at 5,322.90 points. The broader markets fared better with the BSE100, BSE200 and BSE500 gaining 0.89 per cent, 1.00 per cent and 1.12 per cent respectively. BSE MIDCAP and BSE SMALLCAP were big gainers and were up 2.01 per cent and 3.25 per cent respectively, showing that the smaller stocks have fared well in the three days of trading during the week. Amongst sectoral indices, the top gainers were BSE CAP, which gained 3.3 per cent while BSE PSU gained 2.07 per cent. BSE AUTO lost 0.70 per cent.

Illustration/Amit Bandre

In individual stocks, REC was a big gainer and closed at Rs 226.95, a gain of 10.41 per cent. IVRCL gained 7.47 per cent and the action in the counter would continue with Zee having made an offer to buy out the promoter at Rs 90 against the closing price of Rs 71.20. PFC gained 6.63 per cent, while BHEL gained 6.46 per cent. The gold loan companies Muthoot and Mannapuram, which were badly hammered week, recovered with gains of 3.40 per cent and 18.26 per cent. FIIs continued their buying and were net buyers to the extent of Rs 1,712 crore and domestic institutions bought shares worth Rs 144 crore. The Indian rupee depreciated to Rs 51.11 in the short week.

There is an, “island reversal” pattern formed on Wednesday, which indicates bearishness. For this to be reversed, the markets need to open with gains today (Monday) and cross the 17,550 on the SENSEX and 5,360 on the NIFTY. Assuming that these levels are not crossed, the markets could weaken and consolidate before making another attempt to cross the level later during this week or next week. The current momentum would have been broken after this fall and there would be good support at 17,200 and 5,175 respectively.

The week ahead would have lot of action with two IPOs from NBCC and MT Educare listing during the week. Infosys would declare its results on Friday the 13th and the result season would kick off in full steam shortly. This could help in deciding the trend and also how the remaining IT companies results would be. Infosys also gives its guidance for the current year and quarter with its results. The Coal India issue was partially resolved with a Presidential Directive being issued. The directive is likely to benefit the shareholders of the company with the GOI being a 90 per cent shareholder. The FSA (Fuel Supply Agreement) to be signed would be applicable to the extent of 80 per cent of long-term agreements for power supply of 20 years and imported coal would be supplied on cost plus basis. The company would decide the penalty in case of shortfall. This is a great victory for corporate governance and independent shareholders.

The expected petro price hike has once again not happened and clearly shows the helplessness of the government in its coalition dharma to take much needed measures to curb subsidies. There is talk now of reducing the excise duty on petrol, so that the price to the consumer does not change but the oil companies have relief on the under recoveries. Secondly, this action would be more or less revenue neutral to the government, as on the one hand they would be sacrificing revenue on account of excise duty, which would be offset by lower payment of subsidies. It would, if done, however be a big relief for the oil companies.

Infosys kicks off the result season, with its March quarter and annual results on April 13. The markets look weak at the beginning and there is a big possibility that after remaining weak in the earlier part of the week, are likely to regain lost ground as the weak progresses. Global cues and trading patterns of FIIs are likely to decide the course of action the markets take this week. Trading volumes have been poor and need to recover if the trend is to become clear. The BSE SENSEX has support at 17,430, then at 17,357, then at 17,211 and finally at 17,075 points. It has resistance at 17,547, then at 17,663, then at 17,825 and finally at 17,921 points. The NSE NIFTY has support at 5,306 points, then at 5,273, then at 5,205 and finally at 5,174 points. It has resistance at 5,339, then at 5,373, then at 5,427 and finally at 5,474 points. It's a possibility that after opening weak and failing to cross the bearish gap last week, markets may initially fall and then recover as the weak draws to a close.

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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