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The Reserve Bank of India’s stance to await more data on inflation before tinkering with rates in its mid-quarter monetary policy review on Wednesday acted as a stopper to the slide on Dalal Street. Later that day, US Fed Chairman Ben Bernanke said the monthly bond purchases would be reduced at a gradual pace over the next year. Contrary to earlier worries related to Fed tapering, after a slight fall, both BSE and NSE notched up smart gains by the end of the week.
The rally received a boost from some individual stocks that did well. For instance, Reliance Industries gained 4.8 per cent after the Government allowed the company to charge higher prices for gas from April. Stocks of software companies also surged on the back of Accenture Plc’s results that beat estimates on strong demand for outsourcing.
Foreign investors buying Indian shares, following news of the Fed tapering, helped the benchmark index Sensex gain 1.79 per cent on Friday, registering the biggest single-day gain in nearly a month. Nifty too, advanced 1.74 per cent. US stocks rose to new highs as data showing faster-than-estimated growth enhanced their investor confidence.
Nevertheless, going forward, investors should be vigilant in a holiday-truncated week due to the December derivatives expiry. The rupee movement, which has been moving sideways for a while and has finished the week at 62.04, will be a crucial indicator. The global markets movements, strong last week, will also play a key role.
There was an increase in daily volumes in both the equity and derivative segments in the latter part of the week. The indicators and oscillators on the daily charts have started moving upwards in the neutral region toward the bullish zone. After testing both the 21- and 50-day moving averages, both the Sensex and the Nifty bounced up strongly and closed well above them. Only an emphatic slip below these moving averages will be a threat to the short-term trend.
The weekly indicators and oscillators are also charting upwards signalling positive momentum.
Sensex (21,079.7)
In the midst of key events and volatility, the Sensex zoomed 1.7 per cent or 364 points for the week. However, it is now testing a key resistance at the 21,000-level. A robust start to next week can emphatically surpass this resistance and take the index higher to 21,206 and then to 21,500 in the coming week. Failure to move higher can find base at the important supports of 20,700; 20,300 and 20,137.
The index can confine itself to trading in the band between 20,000 and 21,500 for a few more weeks. This sideways movement will be a positive sign from a long-term perspective.
For the index, the medium-term trend is up. This trend will remain in place as long as the index trades above 19,850 levels. A fall below this level will threaten the medium-term trend. As mentioned in this column last week, the next key supports are placed at 19,405 and 18,955.
Nifty (6,274.2)
The Nifty rallied 105 points or 1.7 per cent in the previous week. It managed to rebound from its 50-day moving average and close well above this average line. However, it is now facing key resistance at 6,300-level. A strong breakthrough of this resistance can take it northwards to 6,350 and on to 6,415 in the ensuing weeks. But, any inability to surpass this resistance level can see it slip to find supports at 6,166, 6,050 and 5,973. The next important support below these levels is at 5,905.
The index can prolong its sideways movement for some more weeks in the zone between 5,950 and 6,400. This move will be positive for long-term prospects. The medium-term trend is also up for the Nifty, and as long as it trades above 5,920 this trend remains in place. A tumble below this level can activate supports at 5,770 and 5,618 levels.
Global cues
The US markets gave a strong show with both the Dow and the Standard & Poor’s 500 recording new highs last week. The Dow gained almost 3 per cent to close at 16,221. Short-term supports are at 15,755 and 15,500. A decisive fall below the second support will drag the index down to 15,264. The medium-term trend continues to be up. As long as the index trades above 14,760, this trend remains in place.
S&P 500 rose 2.4 per cent for the week to end at 1,818. Important supports to watch for are at 1,775; 1,745 and 1,700. Medium term trend will stay positive as long as it remains above 1,450 levels.
With the announcement of the US Fed tapering, gold took a hit tumbling 2.8 per cent or $35 an ounce to close the week at $1,202.6. The yellow metal is testing support at $1,200. Immediate key support for the metal stands at $1,179. Decisive falls below this level can pull the precious metal lower to $1,100 in the medium term. On the other hand, significant resistance can be seen at $1,250, $1,270 and $1,300.
Light crude oil advanced $2.7 a barrel or 2.5 per cent to end the week at $99.3 level. The short-term trend is reversing upwards following the earlier downtrend. However, it is facing important resistance at $101. Only an emphatic rally above this level will alter the short-term trend upwards and take the commodity higher to $105 in the ensuing weeks. Key supports are placed at $96 and then at $93.
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