Budget binoculars

Workers lay piping at a construction site in Mumbai. The government is expected to ramp up spending in its latest budget, seeking to ease the pain of demonetisation. Pic/AFP

Workers lay piping at a construction site in Mumbai. The government is expected to ramp up spending in its latest budget, seeking to ease the pain of demonetisation. Pic/AFP

On Friday, Nifty closed positively above 8600. It is likely to gain momentum. Nifty has immediate resistance at 8722 and 9000. Nifty has strong support at 8628 and 8572. Market participants have created fresh long positions after the January expiry, with high expectations about the budget, on February 1. Presently, the market has entered into the overbought territory and the India VIX jumped more than 5 per cent on Friday ahead of the budget, showing volatile movements. It is interesting to notice that the S&P 500 VIX in US moved below 11 per cent suggesting further uptrend in key US indices.

View the sectors
Beginning this week, the market may trade in a narrow range, with support at 8628 and it may face resistance at 8722. A break below and above these said levels can take Nifty to the unchartered territory. Banking Nifty has also outperformed the broader market on Friday. Like Nifty it is also entered in the overbought territory. Banking Nifty has support at 19560 and 19391. There is immediate resistance for Nifty at 20190 and 20838. This week, we can expect highly volatile movements on the Banking Nifty too. Create long positions in frontline banking stocks.

The steel sector is also expected to outperform the broader market this week. Investors can buy good quality stock at this sector for medium term. If we get good support from Banking and Metal stocks, then Nifty may move above 9000 during the week. One should take a cautious approach at higher levels on the first days of the week due to the overbought situation, but we can create long if there is a technical correction. IT stocks are still looking weak due to technical reasons. It is prudent to reduce long positions at every rise.

The Dow Jones
The Dow Jones is poised to move above 20167 and later, it can even move towards 20585 during the week. Support for the US Dow Jones is at 19905. The latest GDP numbers were below street expectation and can cause minor technical corrections. Analysts were expecting 2.2 per cent growth in GDP but it was only at 1.9 per cent and kept the market participants under tremendous pressure. If the market opens with a downside gap today, investors will use it as an entry level because of the lower VIX. Concerns about Chinese military deployment in East and South China Sea are a major concern for the market participants, because this can lead to a military conflict between US and China.

Company announcements
A number of front line companies are to announce their quarterly earnings. These are Bajaj Fin, Dish TV, Grasim, HDFC, Kitex, V Guard, Bajaj Auto, Century Text, GHCL, HCL-Info, ICICI Bank, INTRGLB, IOC, Tata Global, Apollo Tyre, Glen mark, Marico, ACC, Jet Air and TORNTPHARM. Macro Economic data is due from the US and so is US Fed Interest Rate decision, Initial Jobless Claims, Non Farm productivity, Manufacturing Pay Roll and Non Farm Pay Roll. GDP growth Rate, Inflation Rate, Industrial Production and Unemployment rate are expected from Euro zone this week. Budget, Inflation Rate, WPI Inflation, WPI Fuel, GDP Growth rate, Infrastructure output, Industrial Production and Manufacturing Production will be unveiled from India. Expecting announcements of more tax sops in the budget speech.

Alex K Mathews is the founder of www.thedailybrunch.com