Bazaaredge.com Weekly Market Outlook 16Aug11

Weekly Market Outlook 16Aug11

 

Technically the level of 5,240/17,770 will act as a major hurdle for the market.  On the lower side 5,050-5030 will act as a major support for the market and dismissal of the 5,000 may result into quick sell off to 4800 minimum and maximum to 4700 levels.  Closing above the level of 5,250 can take index to the level of 5400. US markets especially S&P may fall by 10% more from current levels where it has proper and strong support (1,090/1,060).  If that happens then we may expect 4,800 achievable on Nifty in near term.  On the higher side 5,350/5,400 will act as a biggest hurdle for the market for next few weeks or even months. Long term investors can certainly look for index stocks to buy around 4,800 levels. Outcome of Industrial numbers in Europe and US will decide further course of the markets.

 

Gold has moved above USD 1,700 on back of US debt crisis. Crude slipped below USD 90 which is indeed positive for the markets. Ongoing parliament session will keep the hopes alive for the Reforms. Interest rates are close to peak. All these factors can bring optimism back in Indian Market

 

Fund flows in the Indian markets have not been that bad considering the intensity of the selloff. The Government too is trying its best to address the governance deficit. But, inflation continues to be a big headache with food inflation flaring in end-July. On the macro-economic front, exports continue to be robust but might moderate in the coming months owing to slowdown in the US and Europe. Tax collections and credit growth have also help up quite well amid signs of moderation in industrial output.  Meeting the fiscal deficit target (4.6% of GDP) will take some doing as GDP projections have been scaled down and disinvestment is in a limbo.

 

Very clearly, the Indian markets would continue to take cues from the global markets. After the selloff in the current week, a relief rally cannot be ruled out. However, as we have been consistently indicating in earlier notes that inflation needs to peak out for markets to stage a durable up move. Nevertheless, the recent sell-off has made valuations reasonable for long-term investing. At this juncture, the markets are also expecting that the government would move decisively on reforms (land acquisition, FDI in retail and GST). Any concrete action on reforms would be taken positively by the markets.

 

We are positive on consumer, media, private sector banking and large IT stocks. We remain selective on the capital goods and infrastructure sector, logistics and oil and gas. We remain negative on cement and auto.

 

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Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. And not soliciting any action based upon it. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report

 

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