The spotlight will once again turn on the Reserve Bank Governor next week as the Central Bank’s annual monetary policy statement is set to be unveiled next Friday.
As cries for reduction in interest rate from India Inc gets louder, investors too have started believing that a policy rate cut is the quickest way to give a fillip to sagging corporate bottom-lines.
Global investors are displaying great affinity with their Indian counterparts by anticipating an interest rate cut from the European Central Bank in its meeting scheduled next week.
The earnings parade will roll on with a host of biggies lining up to reveal their scorecards, keeping investors busy.
The short four-day week that has just gone by saw stocks build on their recent gains. Both the Sensex and the Nifty closed 1.5 per cent higher for the week. Volumes shot higher on Thursday, the day of derivative expiry.
The Prime Minister’s Economic Advisory Council’s bullish prognosis on GDP growth for the current fiscal at 6.4 per cent provided the impetus to send stocks higher in the early part of the week.
Squaring of short positions ahead of the expiry of April derivative contracts was the other factor aiding the up-move in stock prices.
There were pockets of intense activity in some stocks. Reliance Industries gained as its arm Reliance Jio Infocomm entered into an agreement for international data connectivity with Bharti Airtel.
The much awaited Jet Airways and Etihaad deal went through, sending the price of Jet Airways first shooting higher and then sharply lower. Maruti surged almost 10 per cent on Friday on strong earnings.
The Sensex and the Nifty built on the gains recorded in the previous week. Rate of change oscillator in monthly chart is moving higher after testing the neutral zone. The moving average convergence divergence oscillator is also reflecting a similar trend, which is good for the long-term health of the market.
Few oscillators in the daily chart are moving into overbought zone suggesting a possible pull-back in the near term.
Sensex (19,286.7)
The Sensex closed higher in three of the last four trading sessions to hit the intra week high of 19,434. But the close was on a tentative note maintaining an ambivalent short-term view.
In our last column, we had mentioned that if the Sensex reverses from 19,426 or 19,500, it can move in the range between 19,500 and 18,000 for few more weeks before it makes the next move. The index is currently hovering around this hurdle.
If the index does not manage a close above 19,500 next week, it can result in a slide to 18,186 or 17,416 in the upcoming weeks.
This negative view can be salvaged if the decline stops above 18,600.
That will mean that the uptrend that began from 18,144 low is set to move higher to 19,600 and onwards to 20,203.
Short-term supports for the index are positioned at 18,950, 18,800 and 18,650. Short-term targets on the upside are 19,430 and 19,600.
Nifty (5,871.4)
The Nifty moved up to the intra-week high of 5,924 before giving up some gains on Friday. The index has closed just above the key trend deciding level of 5,862. But there isn’t a strong move above this level yet.
That means it is still positioned at a critical juncture from a short-term viewpoint. There can be either a surge to the peak at 6,112 or a decline to 5,477. Investors can hold their long positions with stop loss at 5,745. Halt above this level can take the index higher to 6,028 or 6,199 in the sessions ahead.
Supports below 5,750 are at 5,700 and 5,650. Fresh long positions should be avoided below 5,650 since that will imply the possibility of further decline to 5,531 or 5,289 in the weeks ahead.
Global cues
Most global markets managed to close higher on a positive note last week. CBOE volatility index moved in the band between 13 and 16 implying that investors in the US continue to be sanguine.
That the index is trading close to its long-term base of 10 implies that the confidence level of investors is what is typically seen at long-term bull-markets. The VIX traded between 10 and 20 between 2004 and 2007 when stocks were in a strong uptrend.
The Dow managed a strong upward reversal last week from the short-term support at 14,500. Rebound from here implies that there is a strong bullish undercurrent in the index.
It will face immediate resistance at the previous peak of 14,887. But target on break above would be 15,126 and 15,548. The medium-term view for the index stays positive as long as it trades above 14,000.
Nikkei at multi-year high
The Nikkei is surging ahead this calendar on the Japanese Prime Minister Shinzo Abe’s move to stimulate the Japanese economy.
The index is up 48 per cent since the beginning of 2013. Main longterm resistance for this index is between 18,000 and 19,000.
This level coincides with the peak formed in July 2007 as well as the 38.2 per cent retracement of the decline from January 1990.
The 14,000 level will try to thwart the rally in the near term. But strong move above this level will pull the index to the next long-term resistance zone cited above.