Mktviews Weekly Techno-Funda Analysis (11/06/2012 - 16/06/2012)

Markets have staged a fantastic upmove of 300 points on Nifty last week backed by huge short-covering on A/c of expectations of a possible interest rate cut by RBI & decent pullback in global markets. 

Key benchmark indices Nifty & Sensex snapped a 4.7% rally by registering gains on all the 5 days of the trading week. 

Though BSE Small-Cap & Mid-Cap index under performed the Sensex as they rose by 2.13% & 2.86% respectively. 

All-round buying was witnessed in all sectors especially interest rate sensitive sectors i.e banking & infrastructure stocks post RBI deputy governor Subir Gokarn's comments hinting that another interest rate cut could be possible at the upcoming mid-quarter monetary policy on 18th June 2012 in order to prop up the slowing economy. 

Also, Prime Minister Dr Manmohan Singh's announcements of approving the setting up of a mechanism that will provide big push to the infrastructure sector to revive sagging economic growth aided to the rally in our sulking markets. 

One more silver lining for our markets has been the continuous decline of International crude prices by almost $20 per barrel below $100 per barrel. In the coming days, if it stabilizes around $95-105$, it would have a positive impact on the fiscal deficit front & even boost corporate bottom-lines. 

The only worrying factor is the movement of Rupee against the dollar. Rupee is continuing to hover around Rs 55-56 against a dollar. If it slides below 56 once again, then this questions about the current pullback in the equity markets would be raised. On the other hand, any recovery in rupee i.e if it breaches 54.6 levels, then it would definitely give further fillip to the equity markets. 

There has been mixed news flow from the global markets. 

China's Central bank (PBOC) & Reserve bank of Australia has cut its key interest rates in order to support growth in their economies while Bank of England as well as Bank of Korea has held rates steady. HSBC China PMI rose to 54.7 while Eurozone Final May Composite PMI fell to 46. 

FITCH has cut its ratings on Spain's Government debt by 3 notches to BBB on Thursday & even signalled thatit could lower it further by putting the country on negative outlook. This rating has come at a time when the country's banking system is already plagued with critical issues. 

Progress of Monsoon would be very crucial as a better monsoon would have a positive impact on inflation & simultaneously boost agricultural growth in the economy. 

RBI policy meet on 18th June would be a key trigger as to whether it gives preference for reviving economic growth by cutting interest rates or hold them steady to have a tight control over inflation & fiscal deficit management. 

Though an interest rate cut would be a tremendous positive trigger, but one should not forget that markets may have already factored it in. 

High Volatility will rule our Markets next week with the following key events scheduled during the week. 

1) 12 June : IIP data for Jan 2012 (Expected 1.5%); 

2) 14 June : Inflation Data (WPI); 

3) 15 June : Advance Tax Payments due for Q1FY13; 

Nifty PCR has increased from 1.23 to 1.46 levels. with significant amount of built-up witnessed in 5100-5200 CE & 4800-5000 Puts.   

Nifty futures closed at a discount of 8.95 point against the discount of 17.05 points to its spot. 

As the rally in last 3 days was on back of heavy short-covering, sustainability of this upmove at higher levels may prove difficult & hence markets may take a breather & witness consolidation & side-ways movement.  

Although Nifty has pulled back from lows of 4760 levels to 5080 levels & closed around it, Dont try to bottom-fish as we feel that its just a technical rebound & before any fresh upmove, markets could once again retest its Weekly Trend Line Support are of 4937-4956 again. 

Once Nifty Futures breaks & closes below 4937, it could drift to lower levels of 4819/4750. 

Further pullback upto 5305/5410 would be witnessed only if critical resistance zone of 5186-5206 is crossed with volumes & Nifty Fut closes above it. 

If fails to close above 5206, will be in the trading range 4937-5206. 

 

Regards,
Team Market View Investments. 
Mo : 9987750901. 
Visit www.mktviews-nifty50.blogspot.com
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