Ashish Kyal market outlook in Economic Times of Navbharat Times

Sensex at crucial levels. View on Banking, IT, Reliance Industries

The below is the English transcript of article by Ashish Kyal, CMT Director of Waves Strategy Advisors in Economic Times section of Navbharat Times.

Sensex showed a sharp move on upside from 20200 seen in mid of February towards 22000 levels as of 10^th March 2014. This sharp up move was a rise of more than 2000 points. Within this period the Banking sector and Capital Goods showed good strength against IT index which has been under pressure over past few weeks. Infosys shares lost nearly 10% in single day after poor futures estimates by the management. This fall was a surprise to many participants. Later TCS also started showing weakness and it seems IT sector as a whole should now enter consolidation after spectacular performance of past year.

Elections will be trigger: Election will be a major trigger that will decide the clear market direction. A clear majority is required by market participants for strong rally. This will help to speed up the infrastructure projects and focus will be on getting growth back on track. 

RBI action will also be important: RBI action in 1^st week of April will be important. Last time RBI increased repo rate to curb inflation and stabilize report. This put pressure on markets. This time it will be crucial to observe if RBI maintains the repo rate at same level which will be important for short term support to stock markets.

Nifty and Reliance Industries correlation:

Reliance Industries is one of the stock in index which has under performed since the start of 2008 correction. This is one of the major reason why Sensex and Nifty has failed to generate strong momentum as Reliance Industries and few other heavy weights have not supported the rally. The reason of comparing the index with Reliance Industries is that we think this can be one of the stock which will be leading the index in next Bull Trend. So a breakout on RIL will indicate a breakout on index as a very high possibility. However, even this time RIL came close to the strong resistance zone near 910 – 930 and reversed back on downside. It has been more than a year since this stock is moving within the range of 770 – 930.

Week ahead:In short, expect a breakout to occur in this week as the sideways correction is already 9 days old. Also a close watch on Reliance Industries is imperative in case this stock leads the direction of movement for major market. Till that happens patience will be warranted!

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