Markets

Up, down, back up: Budget has indices confused

BL Research Bureau | Updated on February 01, 2018 Published on February 01, 2018

The charts point to more indecisiveness ahead

Both the bellwether indices, the Nifty and the Sensex, started Thursday in the green, taking positive cues from global markets, ahead of the Budget. They remained in positive territory in the first half of the trading session, but lost their nerve as the Budget presentation turned to the section on taxation proposals.

The implementation of the long-term capital gains (LTCG) tax at 10 per cent on gains over ₹1 lakh triggered a sell-off in the indices: the Nifty slumped below 11,000 and the Sensex below 35,800. However, the sell-off didn’t last long and the benchmark indices bounced back into the green, backed by short-covering and buying interest at lower levels.

Witnessing selling pressure at higher levels once again, the indices closed the session in negative zone. The Nifty fell 10 points to close at 11,016, while the Sensex slipped 58 points to finish at 35,906. Both the indices were volatile and formed a ‘spinning top candlestick’ pattern on the daily chart, indicating indecisiveness in the market.

There were some solid gainers in the mid-cap segment, as they reacted to the Budget proposal of a reduction in corporate tax to 25 per cent for companies with turnover up to ₹250 crore. The Nifty Mid 100 index, however, ended the session down 127 point to 20,657. The main gainers were M&M and Eicher Motors, both of which gained more than 4 per cent intra-day on the hope of a pick-up in rural consumption and the higher outlay towards agriculture.

Upmove likely for M&M, Eicher

The M&M stock breached a key medium-term resistance at ₹775, gaining 4 per cent on Thursday to close at ₹797.3 on the BSE. The stock now tests key resistance at ₹800. An emphatic breakthrough beyond that level will take it higher to ₹900 and then on to ₹1,000 in the short to medium term. Key support at ₹775 and ₹750 can provide a base for the stock in the near term.

The next key support is pegged in the band between ₹700 and ₹710.

After taking support at ₹26,500 last week, the Eicher Motors stock began to move higher. On Thursday, the stock advanced almost 4 per cent with above-average volumes.

The near-term outlook is bullish for the stock. It can extend its rally and test resistances at ₹28,500 and then at ₹30,000 in the short term. A further break above ₹30,000 will strengthen the bullish momentum and push the stock higher to ₹31,000 levels. Supports to note are placed at ₹27,500 and ₹26,500 levels.

The Titan Company stock fell 4.3 per cent as the Q3 numbers missed estimates, despite the company reporting a 21 per cent increase in net profit. It closed at ₹831, breaching a key support level at ₹860. Moreover, this fall has breached its 21- and 50-day moving averages.

The near-term outlook is bearish for the stock. It can extend its downmove and test supports at ₹800 and ₹750 levels. Significant resistances are at ₹860, ₹900 and ₹930 levels.

Published on February 01, 2018
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