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The Week Ahead: Global cues, corporate earnings to dictate trend

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The week ahead should see global cues take centre stage as the markets prepare for more volatility in a week shortened by holidays.

The Nifty’s date with the 6,000 mark has been postponed for later this month and we may see the index range-bound in the coming week.

The week gone by started with great fervour and by mid-week all possibilities of the Nifty touching 5,900 by Diwali were very much on the cards. However, very weak global cues with fresh worries over the US fiscal cliff and new taxes being imposed by President Barack Obama, who was re-elected to a second term, saw the Dow suffer its biggest weekly fall since June this year. Also adding to the weakness locally were poor results from heavyweight index stocks such as ONGC and State Bank of India.

Technically, the Nifty closed down 0.2 per cent for the week at 5,686 after touching a month-high of 5,777. The week ahead should see support for the Nifty at 5,640 and resistance at 5,730. The high beta Bank Nifty managed to close marginally in the green, up 0.02 per cent at 11,475 despite a sell-off on the last trading day due to the SBI results. Bank Nifty again finds support at 11,300 and resistance at 11,730.

The week saw Indian markets continue to stand out in the emerging market basket and outperform most peers. Global cues continued to play spoilsport with fresh worries emanating from Europe on Greece and very weak data from Germany, which saw most European indices close deep in the red.

The global uncertainty also took its toll on commodities, with oil and base metals showing sharp falls. The markets will watch out for more results and IIP/inflation data due later this week.

Tracking the 'A' group stocks, the top three gainers of the week were L&T Finance (up 18.89 per cent), United Spirits (up 14.81 per cent) and Unitech (up 9.98 per cent). The top three losers of the week were Ipca Lab (down 8.17 per cent, Crompton Greaves (down 7.98 per cent) and Apollo Tyres (down 7.40 per cent).

Most global investors continue to be bullish on India and would be using every correction as a buying opportunity mainly on the back off commodity weakness and better corporate performance on the back of recent reforms by the government. Global investors will now watch for greater implementation of important pending obstacles like the resolution of coal pooling for power projects, clearances for Karnataka and Goa on iron ore mining issues, handling the current account deficit, the disinvestment calendar for the remaining financial year and the removal of subsidies. Things seem to be on the upside with more coordination between ministries and also with quarterly results, which came in better than consensus estimates.

Nifty’s rendezvous with the 6,000 level may have been postponed for some time, and the pessimism on the rally and continued foreign inflows on the back of domestic selling suggests that this time the meeting will take longer than expected.

Story first published on: November 11, 2012 20:01 (IST)

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