Ride the wave

The week gone by till expiry day on Thursday was virtually flat, but last Friday was a completely different day. The last day of the previous week and the month of June saw the best single day performance for the calendar year 2012. The SENSEX gained 439 points while the NIFTY gained 129 points. The BSESENSEX gained 457.47 points or 2.70 per cent to close at 17,429.98 points. The NSENIFTY gained 132.85 points or 2.58 per cent to close at 5,278.90 points. The broader indices like the BSE100, BSE200 and BSE500 gained 2.64 per cent, 2.66 per cent and 2.59 per cent respectively. The BSEMIDCAP gained 2.39 per cent, while BSESMALLCAP gained 2.13 per cent.

Illustration/Amit Bandre

The gains during the previous week were broad based and almost all sectors gained. The top sectoral gainers were BSEMETAL up 4.26 per cent, BSEBANKEX up 3.01 per cent and BSECAP up 2.95 per cent.

Stocks
In individual stocks, REC gained 7.77 per cent, PFC gained 7.68 per cent, Maruti up 6.27 per cent, ICICI Bank 5.63 per cent and Tata Steel up 5.41 per cent. Losers were far fewer in number, but amongst the notable ones were Tata Motors down 2.00 per cent and Hind Unilever down 1.30 per cent.

The previous week saw the Rupee recovering after hitting a new low of Rs 57.32 to close at Rs 55.60. FIIs were big buyers of Rs 2,900 crore, while domestic institutions were sellers of Rs 164 crore. Institutional activity prior to last Friday was almost neutral, which means everything that happened did so on Friday last week.

Previous week opened well on Monday, with expectations of a parting gift from the outgoing Finance Minister (FM). Nothing of that sort happened and the markets after opening positive actually closed in negative territory. The rest of the week till last Thursday, which was expiry day, was fairly quiet with virtually nothing happening.

Upbeat
There were many reasons attributed for the sharp rally last Friday. One of the reasons was the temporary solution of the problem facing European banks, which was resolved after a marathon session of over 13 hours. This event saw global markets rallying and India was no exception. GAAR was a thorn in the case of FIIs and was criticised by all sections when it was announced in the budget. The new FM, which is the current PM, is expected to announce the guidelines for the same. Draft guidelines have been issued and promptly withdrawn as not being seen by the PMO. The confusion continues, but the markets rallied on the expectation that pro FII clarifications would be issued. The only two points which are clear are the date of implementation being April 2013 and that there would be no retrospective implications of the above rule.

The mood was upbeat, and hence nobody cared for final clarifications. Petrol prices were lowered on the weekend, but there is no clarity when diesel prices would be raised or the policy on pricing of diesel will be announced. It appears that till presidential elections are over; there would be no action on this issue. The first quarter of the current year is over and no concerted effort to reduce fiscal deficit have been taken so far. One hopes our new FM takes this issue seriously and announces some action or policies which have been stuck for quite some time.

Strong
The week ahead is likely to open on a strong note, considering that there has been a technical breakout, which happened on Friday last week. The markets gave a break out and the upward gap, which was created on the SENSEX at 17033-17134 and at 5159-5189 on the NIFTY will be crucial in the next couple of weeks. We are back at early February 2012 levels when we were in a strong up trend. Quarterly results for the April June 2012 quarter will start kicking in from next week and a lot would depend on them. Indications from IIP and various manufacturing data indicate that all is not well with the industry.

The SENSEX has support at 17,226 points, then at 17,014 point, than at 16,913 points, then at 16,646 points and finally at 16,581 points.

It has resistance at 17,540 points, then at 17,647 points, then at 17,854 points, then at 18,040 points and finally at 18,235 points.

The NSENIFTY has support at 5,216 points, then at 5,154 points, then at 5,119 points, then at 5,085 points and finally at 5,055 points.

It has resistance at 5,313 points, then at 5,344 points, then at 5,411 points, then at 5,456 points and finally at 5,505 points. The markets have gained momentum with the sharp up move on Friday last week. For markets to remain positive we need news flow and Foreigner buying to continue in the coming days.

Trade cautiously and make use of the momentum. To make profits one must make proper use of stop losses, otherwise paper profits could turn to losses.

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 https://ak57.in

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