The Week Ahead: Markets at 28-month high, expect consolidation

The week ahead will have results from key Nifty companies and also both WPI and CPI inflation data. The other key indicator for the week ahead would be the weakness in the rupee, which is showing huge divergence vis-a-vis the stock market and would be a huge point of concern if it continuous to be weak. The currency ended the week at 54.8, its highest level in the last three months.

 

The Nifty gained 2.75 per cent and the Sensex rallied 2.79 per cent for the week ended May 11. The high beta 'Bank Nifty' also ended the week with gains of 3.12 per cent.

 

Technically, the Nifty has closed at 28-month highs and now faces multiple resistance at 6,140/6,160, with support coming at 6,020 levels. The Bank Nifty now faces resistance at 12,850, while support comes at 12,400 levels.

 

The rally has been sharp, swift and sweet, and the old adage which comes to my mind is 'be fearful when others are greedy', and so 'sell on rallies' continues to be the theme for the week ahead.

 

The global upward trend continues and now the consensus trade is to sell gold, commodities and bonds, and buy equities. The US and German indices continue to see new all-time highs, while most other countries are seeing new 5-year highs. The sharp rally in the Japanese yen from 74 to 100 in the last 4 months saw the Japanese 'Nikkei' index close at 5-and-1/2 year highs, as currency gains saw big moves in all export-related stocks.

 

The consensus trade, however, now seems to be getting overcrowded and equities now seem to be very 'frothy' with a huge correction lurking very close. The sharp movement in stock prices is not reflecting in positive economic data with most countries reporting poor and weak growth.

 

Our local 'political pot-pouri' drama resulted in two key ministers tendering their resignations and which weakened the position of the Prime Minister immensely. However, with positive momentum in the shape of rising stock prices, markets seem to ignore all negative news flow.

 

The IIP (index industrial production) for the fiscal year gone by came at its lowest level in the last 20 years, which suggests that economic activity continues to be very weak and stagnant.

 

Foreign flows continue to be positive and now on a daily basis, the ETF (exchange traded fund) flows have turned positive with the money -- which was exiting the markets in March/April when the Nifty was at 5500 -- now returning as the Nifty crossed 6000.

 

Tracking the 'A' group stocks, the top three gainers of the week were - MMTC (23.12 per cent), Berger Paints (19.80 per cent) and Muthoot Finance (17.65 per cent). The top three losers of the week were - Wockhardt (9.66 per cent), Allahabad Bank (9.42 per cent) and Jubilant Foodworks (8.52 per cent).

 

Disclaimer: Sanjeev Bhasin is an independent market analyst. The opinions expressed here are the personal opinions of the author. NDTV is not responsible for the accuracy, completeness, suitability or validity of any information given here. All information is provided on an as-is basis. The information, facts or opinions appearing on the blog do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.