There will be some euphoria this week before the ground realities resurface and profit taking emerges as the results season kicks off.
The indices had a fantastic September, gaining 7.6 per cent, and will now await global cues from Spain along with US Fed’s statement on jobs weakness. Spain's debt levels are set to rise next year, piling pressure on the government to apply for aid as it pours funds in to cash-strapped regions, an ailing banking system and rising refinancing costs, its budget showed on Saturday.
In a holiday-shortened week, Indian markets will look forward to more measures from the government in the shape of foreign direct investment (FDI) in insurance as well as key recommendations from the government-appointed Shome Committee on tax proposals under General Anti Avoidance Rules (GAAR), which will impact foreign investors.
In the week gone by, the Nifty closed higher by 0.21 per cent at 5,703, its highest close in the last 15 months and the high beta Bank Nifty closed up 0.87 per cent at 11,456. The real outperformance was from the BSE Mid Cap index, which gained 2.72 per cent, and the BSE Small Cap Index, which gained 3.06 per cent, reflecting the broader market strength.
The Nifty will now face resistance at 5,850/5,900 and support at 5,560/5,580, while the Bank Nifty will face resistance at 11,800/11,850 and support at 11,075.
We also head into the July-September earnings season this week and with very muted expectations of corporate performances, markets will be wary once results come in. They will also watch out for key monthly auto sales and cement despatch numbers.
The optimism on the rupee’s strength will sustain the rally, but poor global cues and results will be the key headwinds which could cap the upside.
Tracking the 'A' group stocks, the top three gainers of last week were United Spirits (up 22.53 per cent), Gujarat Gas Company (17.31 per cent) and Pantaloon Retail (16.79 per cent). The top three losers were SAIL (down 7.67 per cent), Cairn India (5.57 per cent) and Bharti Airtel (5.11 per cent).
The debate on the Nifty hitting 6,000 before Diwali is getting louder in the backdrop of every rating agency and overseas brokerages downgrading India’s gross domestic product growth rate, which only highlights the fact that if you can isolate the news from the noise, you could actually create huge buying opportunities.
With inputs from Thomson Reuters