MARKETCALLS

This week market may consolidate near current level

Last week Sensex gained 223 points or +1.24% to 18221 and Nifty gained 108 points or +1.31% to 5479 in the week ended 3-9-2010. Last week nifty bounce back from bottom but still nifty could not cross previous high of 5543. On weekly basis nifty is having strong support at 5334 and resistance at 5543.

Last week GDP data showed good strength. Auto sector and Cement sector also showed good numbers. Looking Indian Vix closed at all time low at 15.86.  This VIX number is showing nifty could not jump easily to new high. Volatility should be increase other wise nifty may slide down again in comming weeks.

This week we advise to buy nifty if it close above 5543. Otherwise remain neutral and sell nifty only below 5392 on closing basis. This week market may consolidate between 5368 to 5540

Profit booking may emerge at higher level after recent strong gains, but rising confidence among foreign investors in India’s rapid pace of economic growth should provide support to equities.

Data on industrial production for July 2010 will be out on Friday, 10 September 2010. Industrial output rose 7.1% in June 2010, compared with revised 11.3% rise in May 2010.

Indian stock market remains closed on Friday, 10 September 2010, on account of Ramzan Id. The US market remains closed on Monday, 6 September 2010, for Labor Day holiday.

Foreign institutional investors bought equities worth Rs 11687.50 crore in August 2010. But, there are concerns that risk aversion may force foreign institutional investors (FIIs) to withdraw money from emerging markets, including India.

Among sector specific bets, shares in the sugar and telecom space could be in focus. The government, last week, started the process of allotting third generation (3G) spectrum to the winning telecom bidders. The telecom operators would be able to use the 3G spectrum for 20 years starting 1 September 2010. With this, the commercial launch of 3G mobile services is expected to happen by the end of this year or early next year, which would enable mobile phone subscribers to access the internet and download videos at a much faster pace.

Sugar stocks will be in focus as some reports suggested that Agriculture Minister Sharad Pawar had made a formal presentation to the Prime Minister on decontrol of the sugar sector. Earlier in July, Pawar was quoted as saying that the Government may consider decontrolling the sugar industry after the end of August 2010.

Among global cues, investors will closely watch the US payroll report on Friday, 3 September 2010. A fresh batch of US unemployment figures for August 2010, anxiously awaited by Wall Street, the White House and millions of unemployed Americans, will prove to be a crucial litmus test for the struggling US economic recovery. Global economic data has not been so supportive lately, spreading an air of caution among investors.

With more initial public offers and share sales lined up, including by large state-run companies such as Coal India, there is a greater chance of the secondary market losing some of its charm in the medium term.

Although, Indian market valuations are high but so is growth and one should remember that economic and earnings growth is in short supply globally. Global investors are chasing earnings growth and their confidence in developed market equities is low.

India’s key southwest monsoon rains were 16% above normal in the past week, compared with 29% above normal in the previous week, the Indian Meteorological Department (IMD) said on Thursday, 2 September 2010. Total rainfall since June 1 till date is just 1% below normal, the IMD said.

Indian economy expanded at the fastest pace in 2-1/2 years in Q1 June 2010. The gross domestic product (GDP) grew 8.8% in Q1 June 2010. The manufacturing sector grew 12.4%, mining sector expanded 8.9%, construction sector grew 7.5%, and farm sector expanded at 2.8%. Output in the combined sectors — trade, hotels, transport and communication, jumped 12.2%.

The economy could grow better than 8.5% in the fiscal year that ends in March 2011, Planning Commission deputy chairman Montek Singh Ahluwalia said on Tuesday, 31 August 2010. Government spending is expected to pick up after the June-September monsoon rains, Ahluwalia said.   (Data Source: Capitalmarket)

NIFTY WEEKLY CHART

WEEKLY NIFTY SUPPORT 5334 AND RESISTANCE 5543

NIFTY FUT. (5485)
Buy above 5550 Target ????
Sell below 5392 Target ????

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Rupesh Yatesh  Dalal
Head Research Team

www.marketcalls.net