Markets have staged a fantastic upmove of 500+ points in last fortnight backed by short-covering on announcement of big ticket reforms push, appreciating rupee, falling crude prices & strong global cues.
Key benchmark indices Nifty & Sensex have continued their upside by advancing by 2% each for the week while BSE Small-Cap & Mid-Cap indices followed suit by rising by 1.5% each.
Buying spree was witnessed across all sectors with Realty, Capital Goods & Power being the highest gainers to the tune of 7-9% while Auto & Metals advanced by 3% each. IT, Pharma & FMCG bucked the trend as profit booking was visible in these sectors on account of rupee appreciation & shift of fund flows from the defensive to high beta sectors.
Taking cognizance of the Government's actions on the fiscal front, RBI in its mid-quarter policy lowered the CRR by token 0.25% to 4.5% while keeping the Repo & Reverse Repo unchanged. CRR infusion would infuse Rs 17,000 Cr into the financial system.
Markets had spooked mid-week & turned edgy after Mamta Banerjee led TMC had served an ultimatum to the Congress to withdraw its ministers from Central Government & withdraw support to it, unless fuel price hike was modified & FDI in retail was rolled back.
But on Friday, Markets displayed a spectacular upmove after Samajwadi Party Chief Mulayam Singh agreeing to continue support to the UPA 2 Govt from outside post TMC quitting the government as well as UPA2.
Hopes have risen after the TMC exit that UPA 2 Government which was earlier being blamed for policy paralysis & non-action would now step up the gas & pursue further economic reforms more aggressively & with mode vigour.
Last Week, Finance Minister P.Chidambaram has announced a cut in withholding tax on Interest payments on Indian Firms Foreign Borrowings from 20% to 5% to encourage more borrowings at very low costs abroad.
Apart from this to boost the retail participation in Indian Stock markets, F.M has also approved the Rajiv Gandhi Equity Scheme(announced during budget) under which new equity investors having annual income below Rs 10 lakh will get a 50% tax rebate on investments upto Rs 50000 in shares either directly or through mutual funds or recognized ETF's subject to a 3-year lock-in.
The Next big energy booster for markets is the bailout package for power distribution companies which will be taken on agenda by cabinet on Tuesday. Also Lowering of subsidy of sugar prices by Rs 3 per kg & relaxation of FDI norms for more sectors starting with Pharma is doing the rounds.
Rupee has risen to 4 and a half month's high followed by a flurry of reforms announced by Central Government in last fortnight & in anticipation of more reforms to be announced.
Rupee has climbed to 53.45 per dollar. Going forward, 52.70-52.95 is a crucial zone. IF 52.70 is breached, further strength upto 51.90-51.50 could be witnessed. Else could consolidate between 52.70-54.
One more silver lining for our markets has been the decline in crude prices from 117$ per barrel to 107-108$ per barrel. In the coming days, if it stabilizes around 105-112$ per barrel, it would have a positive impact on the fiscal deficit front & even augurs well for the corporate bottom-lines.
PCR-OI has sharply increased from 1.1 to 1.25 mainly due to significant additions witnessed in 5500-5800 Put options as well as good unwinding was witnessed in 5400-5600 Calls on account of short-covering.
Maximum Open Interest is built up in 5700-5800 strikes in case of Calls & 5500-5600 strikes incase of Puts indicating a trading range of 5586-5768.
Vix has risen from 14.5 to 19 levels in the past week & could further rise upto 22-23 levels.
With F&O expiry on Thursday & continuing uptrend in Vix, we can expect Markets to exhibit more choppiness & be highly volatile.
Markets are now poised crucially after a steep upmove of 500+ points from 5230 to 5730 and Action would now shift to small-caps & mid-caps with large caps looking exhausted & most technical oscillators reaching over-bought zone.
The kind of momentum markets are currently trading in, it could easily scale up to levels of 5950-6000. But avoid initiating fresh positional longs at this level as the rally in the last 2 days from 5550 to 5730 has been on the back of heavy short-covering, Nifty futures could retrace upto 5590-5610 levels & if 5590 holds, could move up further till 5900+ levels.
Going forward,
Nifty Futures would face stiff resistance @ 5760-5768 levels crossing & sustaining above which it would be further bullish upto 5850 & 5934.
If fails to cross & sustain above 5768, will be in a trading range 5586-5768.
Strong Support lies @ 5586-5590.
If breaks & closes below 5586, would lead to profit booking upto 5495 & 5410 levels.
Regards,
Team Market View Investments.
9987750901.
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