Election results rejuvenated the markets towards the end of the last week.
Election results rejuvenated the markets towards the end of the last week. On Friday, Nifty reversed its direction and closed above the psychological support level of 5500. Most of the trading sessions last week were dull and negative as the economic data, which came out, was not in favour of a major pull back. 
The Index of Industrial Production (IIP) numbers were at 7.3 per cent against 15.5 per cent in the same month a year ago. The performance of the manufacturing and mining sectors was not upto the mark, which pulled down the Index. The inflation number thankfully declined to 7.7 per cent in the week ended April 30 from 8.53 per cent in the previous week and the fuel price index advanced 12.25 per cent against 13.53 per cent previously. Also the widely awaited Empowered Group of Ministers (EGoM) meeting on fuel price hike deferred the decision on diesel and LPG by a few days.
Selling Nifty options are not at all advisable, because of low implied volatility.u00a0 Nifty remained in a range of 100-200 points last week. Nifty is having major resistance at 5625 and if it can stay above this level for consecutive sessions then further upside can be expected. On the other hand, if it once again moves below 5450 level then we may see more downside as the market is still trading below its 50, 100 and 200 Day moving averages. The quarterly numbers didn't give the expected support to the market.
The monsoon, which is presumed to be good, will be a factoru00a0 that will be considered by market participants.u00a0 Investors can create long positions on the Nifty and Front line Nifty stocks, but should adopt some kind of hedging strategies.u00a0 Long futures are considered on State Bank of India (SBI) and Larsen and Toubro (L&T), but try to buy put options of these stocks to protect the down side risk.
Rate sensitive sectors kept away from major movements even though minor recovery was seen after the interest rate hike last week and the postponement of the fuel price hike to this week. Metal stocks fell last week and commodities slipped on London Metal Exchange (LME). We saw crude price moving below $100 once again and gold price slipping below $1500. Base metals too were down triggering selling in Sterlite and Hindalco.
Major reason for the slide in metals can be attributed to the fear of more monetary tightening by China and an increase in the US jobless claims a few days ago. The precious metals outlook still remains negative and volatile; gold has support at $1480 and $1472 and silver at $32.18. Crude may test the support level of $95.85. Of the three dollar denominated commodities, outlook for crude still remains very strong.
Global markets too were weak as the economic data was mixed. The US import price index rose to 2.2 per cent against 2.6 per cent while the wholesale inventory was at 1.1 per cent against 1 per cent. The Chinese inflation rose to 5.3 per cent against an estimated 5.2 per cent along with a fall in its Industrial production to 13.4 per cent against 14.8 per cent. On the European front, the French nonfarm payrolls rose to 0.45 against 0.2 per cent previously. Global cues, in the past few days were not very robust. Individual stocks like Jindal Steel, Kotak Mahindra Bank, Lekshmi Vilas Bank and Jammu and Kashmir bank can be bought at every decline for a short to medium term perspective.
The author may have a vested interest in investments he has recommended. Feel free to e-mail him at alex@geojit.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here.
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