The below is the English
transcript of article by Ashish Kyal, CMT Director of Waves Strategy Advisors
in Economic Times section of Navbharat Times
Indian equity market has been
struggling over past few weeks. Intraday volatility has increased given the
news flow and data such as WPI figures, Industrial growth and worry about
domestic demand pick up. Sensex managed to close at 27324 with some gains on
Friday but has so far not taken out the upside resistance of 27600 which is
important for short term positive confirmation. On downside low at 26400 is
very important support. We can expect a range bound movement in current week
and only a break above 27600 will resume the uptrend.
Midcap and Smallcap
sectors: Selling seen over past few weeks was more prominent in Midcap
and Smallcap sectors which have reached over valuation area. Pharma sector has
also corrected sharply from the highs as a few of the stocks were demanding
very high PE ratio which was not justified. Banking sector on the other hand
has been consolidating within a range and fresh clues are awaited for future
trend to emerge.
RBI steps will be
crucial: WPI inflation data released last week has dropped to record
low levels of -2.65%. This has raised expectations that RBI can start focusing
on growth and cut the key policy rate in its upcoming monetary meeting to be
held on June 2. RBI has cut interest rate twice this year and after the negative
WPI figure and poor industrial growth, pressure will be build on them to take
further positive steps which will be important for direction of interest
sensitive stocks.
Indian Rupee: Indian
Rupee had been under pressure over past few weeks and has touched the level
above 64 against USD few days back. Further move above 64.50 will be a concern
for RBI as Mr. Rajan has managed to reduce the volatility in Indian Rupee after
taking over as governor. Move above 64.50 can trigger more USD demand thereby putting
pressure on the economy.
Minimum Alternate tax
(MAT): Uncertainty over MAT for years prior to April 2015 has made
foreign investors nervous and has reduced confidence in existing government.
Decision on MAT is going to be important to restore back confidence into Indian
government and their reform policies.
China IPOs impact: Chinese
equity market has been in news after as many as 20 companies have been planning
to issue IPOs. It is believed that this will impact other emerging equity
markets including India as Foreign institutions will probably move out of other
equity markets and will start putting money in Chinese IPO that has given
promising returns over past year.
Week ahead: Sensex
has been moving sharply over past few days but within a range. This week the
support is at 26400 and upside resistance at 27600. We can expect consolidation
between this unless more clarity is obtained from the above fundamental data.
From technical perspective prices have moved below 20 weeks Moving average
which represents medium term direction. Investors should therefore remain
cautious and wait for clear breakout!
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