Stock Specific Movement

Global cues had initiated the much needed correction in the market and Nifty had already completed two weeks of mild correction. Despite higher WPI numbers, possible weak monsoon and Iraq crisis, market had only seen a mild correction, which shows the resilience.

Once the time wise correction/consolidation is over, market could go up again provided budget does not disappoint. Given the way railway fares were increased towards the end of last week, market can expect tough decisions in the interest of the economy, which would be welcomed by the market.

While some short term pain is possible because of such decisions, it would be beneficial for the economy in the long run. Present Government is committed for reforms and while these factors are mostly factored in, further upside would be possible. However, technical correction from Medium term point of view is due and could happen in course of time.

Hence, investors should buy only with Medium/Long term view in a staggered manner. There are strong supports at 7400 and at 7200, which level could act as a solid short term support. Approach to suit the present environment is stock specific/sector specific, as sectors which had performed in the last couple of years have started underperforming now.

At present bull run is about 8 months old, and further rise over a period of next one year can be expected despite the sharp initial rise. Government’s policies would indicate thrust areas and sectors that would benefit. Budget in July would spell out the major policies of the government. However, it can be expected that FDI norms liberalization would be a positive factor.

Stock specific approach is to be followed and general positive sentiment can be expected to continue. Key support levels for the above time frames are 6300, 6650 and 7400 respectively. Sectoral rotation has become order of the day and different sectors should be tracked to discern individual stock trends.

Nifty continues to be above 200 DMA and 50 DMA too is above 200 DMA suggesting that the long term bullish trend is intact. Even with the recent rise, Nifty is quoting at a PE of about 20.75, which is about 15 per cent above the long term PE multiple. Hence, further upside (8000+ is possible during the year) in view of the stable and performing Government at the centre as earnings would go up because of favourable atmosphere.

For the coming week, Nifty spot is expected to face resistance at 7600, 7685, 7780 and find support at 7425, 7340, 7255. Nifty continues to remain in short term bearishness and would come out of short term bearishness when it closes above 7625. Strong resistance at 7700 and strong support at 7400, then at 7200 can be expected.