Rolling along as expected

Oct 17, 2011, 08:33 IST | Arun Kejriwal

The markets were on a roll and performed as expected. The only change was that the rally resumed on Friday, while at the end of last week, I expected that the correction, which set in on Thursday, would continue

The markets were on a roll and performed as expected. The only change was that the rally resumed on Friday, while at the end of last week, I expected that the correction, which set in on Thursday, would continue. The BSE SENSEX ended last week with a gain of 850.15 points or 5.24 per cent to close at 17,082.69 points while the NSE NIFTY gained 244.25 points or 5 per cent to close at 5,132.30 points. The BSE100, BSE200 and BSE500 gained 4.85 per cent, 4.68 per cent and 4.54 per cent, while the BSE MIDCAP and BSE SMALLCAP 3.87 per cent and 2.77 per cent. The gains in the midcap and smallcap have been significantly lower. If the rally has to continue, these two indices have to do some catching up and are likely to be in action this week.

Illustration/ Jishu Dev Malakar

The big gainers in the week were Tata Motors with a spectacular gain of 13.29 per cent. BSE BANKEX was a star performer with the index gaining 6.93 per cent. ICICI bank rose 8.01 per cent while SBI gained 7.48 per cent. Heavyweight Reliance Industries rose 8.24 per cent to close at Rs 867 on the eve of its result, which was declared on Saturday. The net profit is a record and has grown 15.8 per cent to Rs 5,703 crore, but the share could be under pressure as the refining margins are below expectation, and also the growth in other income, which was significantly higher, diluting the quality of earnings a tad. Infosys declared results, which were ahead of the street, and it is probably after some eight or nine quarters that post Infosys results, the stock is up and the markets have also gained. Infosys rose Rs 238 or 9.49 per cent to close at Rs 2,745 while TCS was up 8.18 per cent at Rs 1,134.50, with the BSE IT index gaining 8.03 per cent.

Friday October 14 saw Tijaria Polypipes list and crash. The company had issued 1 crore shares at Rs 60 and the stock closed at Rs 18.10, a loss of almost 70 per cent. It may also be mentioned that 97.5 per cent of the shares were delivered on day one. The week will see listing of at least five issues during the week and one only hopes that they do not meet the same fate, as has been the case with RDB Rasayan and Tijaria Polypipes.

Inflation refuses to come down and it now seems that RBI will hike rates once again in the review meeting on   October 25. The India rupee recovered some ground and closed at Rs 49.02 for the week. Foreign Institutional Investors continued to be buyers during last week and bought stock worth Rs 1500 crore in the week while domestic institutions sold stock worth Rs 530 crore.

The markets have been trading in a range of roughly 400 points on the NSE NIFTY and roughly 1400-1500 points on the BSE SENSEX and it is since August 4, when the markets slipped with a gap that this is continuing. The markets are now coming into resistance area and if we are to recover from the current levels crossing this area of gap, which exists in the SENSEX between 17,664 and 17,358 and the NIFTY between 5,323 and 5,229 needs to be breached upwards. This is a tall order, considering the fact that global markets have been recovering even though concerns about the economic conditions remain. Coming to India, we have made a good start with Infosys results but not all companies will fare similarly, considering that the rupee has depreciated very sharply and interest rates and raw material prices have risen since the last quarter.

The week beginning Monday, October 17, is likely to be volatile and open on a strong note, but there is likely to be profit taking as the week progresses. The fact that we have had a solid 5 per cent gain in the previous week, will also lead to profit taking at higher levels and considering that we are reaching important resistance levels are likely to be a drag on the markets. The BSE SENSEX has support at 16,903 points, then at 16,619 points, then at 16,504 points and finally at 16,230 points. It has resistance at 17,187 points, then at 17,386 points, then at 17,471 points and finally at 17,645 points. The NSE NIFTY has support at 5,078 points, then at 5,018 points, then at 4,994 points, then at 4,962 points and finally at 4,861 points. It has resistance at 5,163 points, then at 5,222 points, then at 5,248 points, then at 5,323 points and finally at 5,434 points.

The crucial areas for the week would be would be between 17,200 and 17350 on the BSE SENSEX and between 5,175 and 5,225 points on the NSE NIFTY. These are important levels and once the market reaches around these levels, would turn volatile and choppy. The markets need to cross and sustain these levels for the present uptrend in the markets to continue. Trade cautiously and watch the markets at crucial levels before taking positions.
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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