Market radar: Rain dissipates pain

May 30, 2016, 09:35 IST | Alex K Mathews

Sentiment lifts, and there is brightness on the horizon, as the weather promises much

Last week, we saw sharp recovery in the markets, on expectations of a good monsoon. Both, the MET Department and Sky Met came out with a positive outlook on the monsoon, which prompted the bears to cover their shorts ahead of F&O expiry. US Homes sales data out last week and was above market expectation, so it lifted sentiment. Morgan Stanley on Wednesday, upgraded Indian markets to ‘overweight’ from ‘equal weight’ on attractive valuations compared with other emerging markets, strong macros, and recovery in earnings growth. Market participants are also expecting a rate cut by Reserve Bank in June.

Monsoon clouds hover over the Arabian Sea in Kochi yesterday. Pic/PTIMonsoon clouds hover over the Arabian Sea in Kochi yesterday. Pic/PTI

SEBI has decided to reduce the number of listed companies in both exchanges. They are looking at almost 1,200 listed companies which have been suspended for more than seven years. SEBI plans easy exit options for shareholders of these companies. SEBI also targeted the companies which are listed in the regional exchanges. The regulator is also planning to distribute mutual fund products by 2016-17 through Amazon and Flipkart.

The US Federal Reserve is planning a rate hike in June, which is a strong indication for the growth of the US economy, when other countries are planning to reduce interest rates.

Nifty, on Wednesday, moved above its 50 DMA and strongly rallied above the 8000 mark with huge short covering ahead of the Futures and Options expiry. Markets are already entered in the over bought zone and it is likely to consolidate in the near term, before a move to the North. Nifty has resistance at 8200 and 8250. Nifty has support at 8059 and 8005 (200 day moving average). If Nifty moved down below 8005 then one should consider 7956 as next major support. All price corrections can be utilised to create long term portfolios.

Banking Nifty recovered during the expiry day and it is also entered in the over bought zone. It has strong support at 16979 and 16728. Banking Nifty has resistance at 17650.

Last week, L&T appreciated after its quarterly earnings, whereas Cipla disappointed the street and the stock came under the attack of bears.

Going forward Auto, OMC, IT and agricultural sectors stocks will be in focus. Metal counters are likely to remain subdued and profit booking can be expected in banking stocks after sharp recovery.

This week, macro datas like NIKKI manufacturing PMI for April Y-O-Y, GDP Growth Rate, Current account and NIKKI Service PMI will come out from India. From China, NBS Manufacturing PMI, Non Manufacturing PMI; and from EURO Zone Consumer Confidence, Retail Sales Y-O-Y, GDP Growth Rate and the Inflation rate.

There is a strong warning from various economists on the Japanese Yen. If the Japanese are not considering stimulus programs then their currency can fall very steeply, which will have a deep negative impact on its economy.

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