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Market Eye
| Week ahead: Election expectations to determine market movement | 10/05/2009 11:32:45 | The week gone by was led by fireworks on Monday after a really long weekend. We started with a huge bang with the BSESENSEX gaining 732 points and the NIFTY gaining 181 points on the first day of the week itself. Thereafter the markets struggled and manage to hold on to a major portion of the gains but lost some ground during the week. The American markets gained after a see saw battle and the good news was that the stress test of banks revealed as per expected grounds with ten of the 18 banks needing about 75 billion $ as capital going forward. The markets heaved a sigh of relief and recovered ground on Friday the last day of trading. The optimism in stock markets is certainly gaining ground and more and more people are feeling as if they missed the bus with markets having gained anywhere between 40 and 50 % from their lows. It may also be mentioned here that this recovery has happened in just about two months.
The DOW JONES continued its upward journey and has now gained ground for eight out of nine weeks. DOWJONES gained 362.24 points or 4.41 % to close at 8574.65 points, while NASDAQ gained 20.02 points or 1.16 % to close at 1739.22 points. Very clearly NASDAQ seems to be struggling, and though continuing to gain is unable to keep pace with the DOWJONES. Asian markets also gained but fared much better than the American markets with the NIKKEI gaining 455.46 points or 5.07 % to close at 9432.83 points. HANGSENG seemed to be extremely buoyant and gained a whopping 1868.88 points or 12.04 % to close at 17389.87 points.
Coming to our markets, they were in a belligerent mood and Monday saw a vertical takeoff. Thereafter markets corrected and ended the week on a circumspect note but after having gained significantly for the week. The BSESENSEX gained 473.18 points or 4.15 % to close at 11876.43 points while the NIFTY gained 146.75 points or 4.22 % to close at 3620.70 points. The broader indices such as the BSE100, BSE200 and BSE500 gained 4.43 %, 4.78 % and 4.98 % respectively. The BSEMIDCAP and BSESMALLCAP gained 7.30 % and 8.54 % respectively, outperforming the rise in the benchmark indices. The two big gainers in the BSESENSEX were ICICI Bank which gained Rs 42.85 or 8.96 % to close at Rs 520.60 and Reliance Industries which gained Rs 94 or 5.21 % to close at Rs 1897.
Amongst the sectoral indices all of them gained except one. The gain however was spectacular with the BSEMETAL gaining a staggering 1064.06 points or 15.45 % to close at 7949.87 points and BSECD gaining 190.91 points or 10.86 % to close at 1948.49 points. The BSEREALTY also put in a sterling performance gaining 225.20 points or 10.57 % to close at 2355.61 points. The only loser was BSEFMCG which lost 1.54 points or 0.07 % to close at 2093.46 points. Amongst the individual stocks from the sectoral indices, Sterlite gained Rs 82.90 or 20.27 % to close at Rs 491.95 while Sesa Goa gained Rs 18.95 or 16.93 % to close at Rs 130.85. From the BSEREALTY, Unitech gained Rs 8.70 or 19.72 % to close at Rs 52.80 while India Bulls Real Estate gained Rs 14.05 or 10.89 % to close at Rs 143.10.
Foreign Institutional Investors were big buyers this week and invested Rs 3170 crs for the week. It is a very encouraging sign but the same should be sustainable for the market rally to continue. Domestic Institutions were more or less neutral for the week. The fourth round of voting is now over and the final round will be complete on Wednesday the 13th of May. From that evening onwards exit polls and various analyses on the expected election results will be available which will affect the market scenario. I believe this week market will be driven purely by local factors and institutional business. Put call ratio and open interest figures also indicate a positive bias in the market and it gives a feeling that there will be a clear mandate from the electorate. Results are due on Saturday the 16th of May and that could bring about a sharp movement in the market either way depending upon the mandate.
The BSESENSEX has support at 11765 level, then at 11700, then at 11583 and finally at 11285. There is very strong support at 10946. There is resistance at 12115, then at 12220, then at 112272 and then at 12530. Strong resistance exists at 12857. The NIFTY has support at 3565, then at 3493, then at 3310 and finally at 3255. It has resistance at 3693, then between 3717-3732, then at 3822, then at 3925 and finally at 3970 levels.
The drivers this week would be mainly local drivers and political overtures and body language could be key indicators. Poll pitch has increased and posturing has begun and by this time next week the results would also be out. Though people have started commenting that elections are a non event, the fact of the matter is that elections alone would be dominating markets this week. As mentioned earlier people are more bullish than bearish and for this very reason I would advise not only caution but also buying insurance in the form of puts for the current month. As mentioned last week trading may become lackluster before the actual results, but volatility increase. My advice be cautious and use rallies to exit and sharp dips to buy. | Market
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