It's high 'n' buy time but current volatility warrants a wary approach
Traders work at the closing bell of the Dow Industrial Average at the New York Stock Exchange. Pic/AFP
Traders work at the closing bell of the Dow Industrial Average at the New York Stock Exchange. Pic/AFP
Nifty continuously tested new highs in recent days, due to higher liquidity and retail participation. On Friday, Nifty closed positively above 10,600 at 10,681. Going forward, the upward momentum is likely to continue and Nifty may test 10,710 and 10,880 levels with much technical correction. Support for the Nifty lies at 10,575.
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Mixed data
The macro data, which came out on Friday is mixed. Domestic industrial production moved up in November on YoY basis from 2 per cent to 8.4 per cent. The negative news is that the domestic inflation rate shot up from 4.88 in December on YoY basis to 5.21. Higher crude oil price is a major concern for global equity markets.
Prudent perspective
Quarterly earning started last week and front line companies like Bharti Tele, Ultratech Cem, Yes Bank, Hcl-Tech, HDFC Bank, ITC, Kotak Bank, Reliance and WIPRO will announce their earnings. So it is prudent not to create huge positions without proper hedge.
Sell off
Dow Jones Industrial average is making new highs and it is likely to move up towards 26,000 with key supports at 25,661 and 24,467. The RSI factor of Dow is at an alarming level. We can expect unexpected bouts of selling in the near future.
Gaining strength
Now let us examine the Nifty Bank, which is likely to move up towards 25,817 and 26,274. Strong support can be expected at 25,555. Nifty PSU Banking stocks are still looking weak and most probably technical correction may continue for some more time. On the other hand, private sector banking stocks are likely gain further strength, but upside is capped.
Stock specifics
IT stocks may open with a firm note but upside for this index is also limited. But stock specific movements can be expected. Like IT stocks, metals stocks are also showing positive chart patterns. Nifty Metal Index could test 4,289 in the short term. Selective buying in the front line pharma stocks can also be expected. On the macro- economic front, WPI Manufacturing YoY, WPI Food, WPI Fuel and Balance of Trade data is due from India. US Industrial Production, Manufacturing production and Initial Jobless claim data is expected.
Positive outlook
Outlook of crude is positive and it is trading at a multi-year high. US crude inventories are rising but OPEC members along with Russia are likely to reduce crude production to keep the prices steady. Crude has support at $63 and $61.75 per barrel and resistance at $64.70 and $65 per barrel.
Alex K Mathews is the founder of www.thedailybrunch.com
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