Fear stalks investors

Published: 28 November, 2011 09:54 IST | Alex K Mathews |

The markets went in search of a two-year low creating fear and helplessness amongst investors. Domestic cues remained positive

The markets went in search of a two-year low creating fear and helplessness amongst investors. Domestic cues remained positive. Europe and Middle East remained a concern. The Arab uprising took an ugly turn in Syria and tension grew on the Iranian side. All in all, markets came to a close registering net loss. The Nifty sport has immediate support at 4634 and 4600. Movements below these two levels can cause further volatile movements to the Nifty and it may test 4500. Resistance for the Nifty will be at 4850 and 4900. 

On the domestic front, food inflation, after a couple of weeks has come down to single digits and is seen as a relief at this point in time. Food inflation had gone above 12 per cent in recent weeks but once it was reported at 9.01 per cent, for the week ended November 12. The fall in inflation is mainly due to the base effect. The price of most agricultural items continued to rise. Onions became cheaper by 32.85 per cent year-on-year, while potato prices were down by 7.23. Price of wheat also fell by 3.09 per cent. Vegetables became 17.66 per cent costlier, while pulses grew dearer by 14.28 per cent, milk by 10.46 per cent and eggs, meat and fish by 11.98 per cent.

Parliamentary approval on FDI limit in multi-brand retail finally got approval. Now global retail biggies like Wal-Mart, Tesco, Carrefour, which have long lobbied for a chance to enter India in which the organised retail market is estimated to be worth around $396 billion this year and is expected to double towards $785 billion by 2015, can have their piece of the pie. As per the decision, multi brand retail can attract a maximum of 51 per cent FDI while single brand retail could attract 100 per cent FDI. 100 per cent FDI in single brand retail will help companies like IKEA, Gap and H&M to set up shop in India.

The Telecom sector is taking a hit for quite some time now as the DOT cracked its whip once again. The Department of Telecom has rejected regulator TRAI's proposal for liberal M&A rules to make consolidation easier in the 14-player ultra-competitive market. It was also heard that The Department of Telecommunications may revoke 3G spectrum of five Telecom service providers for violation of license agreement by offering 3G Telecom services in states where they do not have spectrum. These companies had entered into bilateral roaming agreements with each other to offer 3G services in states where they were not allotted 3G spectrum.

Gold is weak below $1716 and has minor support at $1663. If gold falls further, then it may even test $ 1643 and $ 1600 levels. Resistance for the gold will be at $1700 and $1716. Firm rupee is hurting domestic demand to a greater extent. Crude is also weak due to global weak economic outlook, and started trading below the key resistance at $ 97.72, and has support at $94 and $91.22.  Price rise can be utilised to sell crude. Silver has minor support at $30.60 below it will have support at $29.77. Rupee has support at 52.75, if it trades below, it may test 53.50 and more.  Resistances will be at 52.10 and 51.68. Investors can buy Raymond for a target price of Rs 408, PFC for a target of Rs 174 in the short term. Counters like Tata Steel, Hindalco and Sterlite are expected to under perform due to the strong dollar index.

As far as Europe is concerned, the new Prime Ministers of major debt ridden countries are under pressure at a time when their countries are facing the worst financial crisis. Ireland has asked for more debt relief as a reward for upholding the integrity of the EU financial system after the Lehman crisis. Greece, on the other hand is running out of money. The incoming Prime Minister is confident that the politicians will show commitment to stringent austerity measures to convince the EU to release proposed funds. According to reports, they have money for running the country for another 20 days and if they don't get the EU loan tranche they may default on their Euro 2.8 billion bond payment in December and salaries and pension payments. The situation in Spain is no different.  

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