The Week Ahead: Nifty may touch 5,900 before Diwali

The Week Ahead: Nifty may touch 5,900 before Diwali

The week ahead should see the Nifty try to break out on the upside and close above 5,750 to resume the upside that was halted by the “freaky Friday” episode on October 5. The default correction brought about by the communication error sell-off extended for almost one month and this week may see resumption of the rally, which could take the Nifty towards 5,850-5,900 before Diwali.

Technically, the Nifty ended the week up 0.6 per cent to close at 5697.70, while the high Beta Bank Nifty ended the week down 0.42 per cent to close at 11,460. The Nifty will now face resistance at 5,830 and support at 5,580.

The week saw the market correct sharply as the Reserve Bank of India disappointed by not cutting rates and only marginally lowered the cash reserve ratio. This saw sharp correction in rate-sensitive sectors such as banks, infrastructure and realty, and was also the reason for the Bank Nifty ending the week with losses. Corporate results were the other driving factor that added to the volatility in the markets. The week ahead will also see results from blue-chip companies such as Cipla, Tata Motors, State Bank of india, Bharti Airtel, ONGC and Tata Steel, among others.

Globally, the US markets opened with subdued participation in the aftermath of superstorm Sandy and saw prices stabilizing before key economic data. European indices also halted their weekly decline and saw some recovery. In the commodities space, oil continued to see selling and closed at almost three-month lows.

The next week will see key political results—Himachal Pradesh assembly election and the US Presidential results.

The recent government reforms process has got the thumbs up from the market. However, the much needed follow up and implementation will be the key for further market price action. The rupee getting stronger and global commodity weakness are helping domestic macros, which should see the economy do better.

With the RBI indicating a looser monetary policy from January onwards, we should see the cost of funds falling, which will see better results from most corporates. Other key events will be the spectrum auction and the disinvestment process that will help the government garner resources and narrow the fiscal deficit.