Moody's upgrade may attract more investors into equity and bond markets

In a surprise move, global rating agency Moody's upgraded India's Sovereign rating from Baa2 from Baa3. This rating upgrade has happened after 14 years, which could attract more foreign investors in the equity and bond markets. After the rating upgrade on Friday, both Nifty and Sensex opened with a positive gap up. At the end of the day though, both indices shed most of gains due to weak global negative cues. Due to the upward rating revision, Indian rupee opened strong and 10-year sovereign bonds yields tumbled by around 10 basis points.

Really Nifty
Nifty closed on Friday above 10,250 at 10,283, is positive but upside is capped due to technical reasons and negative global cues. Nifty has immediate resistance at 10,341 and 10,390. If these two levels are taken off next week then it could test 10,492, though chances are remote. Nifty has support at 10,256 and 10,121. Breakdown below these supports could bring it below 10,000.

Big risk
The biggest risk in the US is the sharp drop in bonds, which is considered an early sign of technical correction of equity markets. The Dow Jones has strong support and resistance at 23,264 and 23,599 respectively, a break below or above can give a major direction for the market. As the monthly RSI of Dow Jones is above 80, one should take utmost care while initiating long positions at higher levels.

Index check
Now let us check Nifty Bank Index. It has support at 25,368 and resistance at 26,009. It is bullish but the upside is capped. Nifty PSU Bank Index is overbought so we can't expect sharp upside, but on the other hand, Nifty Private Sector Bank Index is comparatively stronger than the Public Sector Bank Index.

Could fall
Due to the strong rupee, IT and Pharma Index could fall further. It is prudent to stay away from both sector stocks along with metal stocks. Metal stocks corrected last week but recovered on Friday due to an oversold situation, the major technical indicators are still weak, only selected stocks will outperform the market.

The end
The result season has comes to an end, the only major three companies to bring their quarterly earnings are Siemens, Skipper and RBL. On the macroeconomic front, Bank Loan Growth YoY, Deposit Growth YoY, and Foreign Exchange Reserve data is due from India. Continuing Jobless Claims, Initial Jobless Claim, EIA Gasoline Stock change and US FOMC Minutes is due from the US.

Crude viewed
Crude is positive, but we saw minor profit booking on Thursday after Iraq and Turkey decided to export crude, which was halted due to various reasons. Technically, crude is likely to move above $58 per barrel and have support at $55.04 and $54.26 per barrel.

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