The Week Ahead: Liquidity easing, budget and golden crossover

The next week should see a strong start with the Reserve Bank of India easing liquidity with a sharper and earlier- than-expected cash reserve ratio (CRR) cut by 0.75 per cent.



With another event risk out of the way, the market would now await the (now discounted) RBI policy meet on 15 March and the union budget on 16 March. The street expectation is very low. The market would like to see how the finance minister handles the burgeoning fiscal deficit and how he manages subsidies, disinvestment and taxes among other things. News flow and rumours could keep the market volatile ahead of the event on Friday.



Technically, as written last week, markets tested the low end of the range and the NSE Nifty rebounded sharply from 5230 to close at 5333 down 0.47 per cent for the week. The volatile bank Nifty closed up 0.69 per cent at 10505 for the week.



This week we shall make the final “Golden Crossover” with both Nifty & Bank Nifty seeing their 50 day moving average or DMA crossing the 200 DMA. This in technical parlance is considered a long-term bullish signal. The Nifty should see a range of 5230 to 5520 during the coming week.



Globally, markets also saw a sharp correction followed by a strong pullback ahead of the Greece news flow.



The regional election results locally also saw the Nifty react sharply as market perception of slowdown in reforms and populist budgetary policies saw strong profit booking. However, the market after reacting till mid-week saw a strong pullback once the discounting of the same took place. We would now see how global inflows pan out and also what the budget does before market charts out there future direction.



The top A group gainers on the BSE were CESC up 9.13 per cent, Piramal Healthcare up 8.94 per cent and Tech Mahindra up 7.16 per cent while the top losers were Pantaloon Retail down 11.66 per cent, Adani Enterprises down 11.37 per cent and East India Hotel down 10.9 per cent for the week gone by.



Markets now seem to be reacting faster and more maturely to events as in the case of election results which made it clear that coalition at the Centre is here to stay with regional parties gaining more clout. This, again, highlights that last year was an “Abberation” and we should see market only gaining strength as news flow or an event get discounted faster and price corrections being bought into quicker than before.

Factors To Watch:



1. Positive reaction to the sharper-than-expected CRR cut.


2. Budget: Expectation and deliverance


3. Global headwinds: Oil Prices


4. Golden Crossover


5. Nifty range between 5230-5520

(Sanjeev Bhasin is an independent investment advisor based in New Delhi and an expert on NDTV Profit’s daily show ‘Buy or Sell’).