Positive outlook

Jan 23, 2012, 10:34 IST | Alex K Mathews

With NIFTY making higher tops and higher bottoms, ahead of the RBI meeting this week, the markets ended on a positive note last week. NIFTY moved above its 100 DMA at 4941. It may test 5100 or 5225 in the short term

With NIFTY making higher tops and higher bottoms, ahead of the RBI meeting this week, the markets ended on a positive note last week. NIFTY moved above its 100 DMA at 4941. It may test 5100 or 5225 in the short term.

During the previous week we saw the food inflation number moving up a bit, but it remained in the negative zone. The food inflation for the week ended January 7 was at -0.42 per cent against -2.9 per cent in the previous week. The fall was mainly due to a decline in prices of onions and certain vegetables.

Onion prices fell by 75.42 per cent year-on-year during the week under review, while potato prices were down by 23.84 per cent.

A major move from the central government to help the ailing aviation sector was to announce the launch of the process to allow foreign airlines to take 49 per cent stake in domestic airlines. This would help airline companies facing a huge cash crunch.

Last week, the government raised the import duty on gold to 2 per cent on value, from the previous flat rate of Rs 300 per 10 grams. In case of silver, the duty was raised to 6 per cent on value from Rs 1500 per kilogram.

The new rate is 90 per cent higher than the previous rate. This move may have a short-term impact but the long-term outlook is still positive given the domestic demand. Precious metal gold is trading sideways with key supports at $1641 and $1634.  Movements below these levels can trim the upward surge. The immediate resistance for gold will be at $1669.70 and a move above this level can take gold towards $1690.50. 

Last week, FIIs were net buyers of around Rs 4480.6 crore compared to 1465.8 crore the week before that.

Early this month, the government announced that it would allow foreign individuals to invest in stock market starting from January 15. LIC, India had hinted that it may pump in another Rs 20,000 crore before the end of this financial year. Depending on the RBI decision and the global scenario, we may see more fund inflow, which may help Rupee to gain more in coming days.

Europe has been sending some favourable cues last week, with most of the bond sales of Spain and France getting good buying interest at lower yield demand.

The International Monetary Fund (IMF) is planning to pool around $600 billion in new resources to lend to countries, which are struggling to meet their debts. Emerging markets, such as China and Brazil have said that they are willing to contribute to the Washington-based institution in exchange for greater voting power. If the bond test in many of the European countries goes well in the first quarter, then the situation in Europe might improve.  However talks between Greece and its creditors remained deadlocked, while Ireland passed the latest review of its European Union International Monetary Fund bailout.

Markets are looking forward for the outcome of RBI policy meet on January 24. There is little chance for a reduction in interest rates but one can expect Open Market Operations (OMOs) for their side.  The January F&O expiry is on Wednesday, one day ahead of the Republic Day Holiday. This may play a crucial role in deciding the market outlook in the short term.  According to F&O data, most of the shorts were covered in the last days and many participants are holding long positions, which in turn can cause higher level sell off.

Short-term traders can pick V-Guard and Hathway cables.  V-Guard is likely to test Rs 192 and Rs 205 in the short term and Hathway cables can move up towards

Rs 145 to Rs 172. Quarterly numbers of HDFC Bank, AXIS Bank, Hero Motors, Bajaj Auto, TCS and Wipro were above expectation and these stocks can move up in the next few days

Alex 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 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.

Go to top