The Week Ahead: politics, results and foreign inflows to dictate trend

The week gone by saw the Sensex gain 1.5 per cent, while the Nifty rose 1.24 per cent. However, the high beta 'Bank Nifty' ended on the losing side, down 1.11 per cent for the week. Technically, the Bank Nifty has not been able to cross the 12,750/800 levels and has made a 'double top' bearish pattern, which indicates further weakness, with support coming at 11,900 and resistance at 12,800 levels. The Nifty also failed to cross the 6,000 levels and now faces resistance at 6,030 while support is seen at 5,830 levels.

 

The markets started the holiday-shortened week cautiously, but were pleasantly surprised on Tuesday with Hindustan Unilever announcing a very bullish open offer at Rs 600, which is the highest-ever price, along with a premium to the current market price.

 

This rubbed off well with market participants as it reverberated huge optimism by the largest and oldest FMCG major, which is committing almost Rs 29,500 crore to buy back its equity. This saw the Nifty scale the 6,000 levels that looked highly improbable a month back.

 

The other big event was the RBI policy, which again proved to be a 'damp squib' with the central bank sounding very conservative and just cutting the repo rate by 25 bps (basis points) and leaving the Cash Reserve Ration or CRR unchanged. This again dampened sentiment and saw the interest rate-sensitive sectors like bank, auto and realty see huge profit-booking, while buying was witnessed in IT, FMCG and metal sectors.

 

Globally, the rally in the US markets continues unabated with 'risk on' trade gaining momentum as the Dow Jones continues to make new all-time highs. Positive jobs data coupled with a pull-back in commodities were the triggers this time. Oil prices rallied smartly, while gold saw some profit-taking.

 

The political circus continues to startle with new disclosures and now after coal-gate, the new controversy is rail-gate, which should again see uproar and agitation disrupt policy decisions. With both neighbours -- China and Pakistan -- adding to the woes of the ruling UPA government, expect more wastage of time in Parliament and delay in passage of important bills.

 

The week ahead should see more corporate results from most underperforming sectors and midcap stocks, which should keep any rise in prices in check. Also, with no visible pass-on of the rate cut by most banks, liquidity issues would continue to hit most corporate balance sheets with bottom lines continuing to weaken. This was also evident in the underperformance of the Bank Nifty, which was the weakest Index this week.

 

However, with foreign inflows getting stronger again, we could see prices hold at present levels with flows matching the negative news flow.

 

Sell on rallies continues to be the buzzword as after a stellar rally, the negatives in the shape of politics, a hawkish RBI stance and a delay in improvement of macro-economic indicators continue to outweigh the positives.

 

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.