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Nifty is forming a double bottom pattern suggesting uptrend
Last week, we had recommended that Nifty formed a "falling wedge" and a breakout could be in upper side. During the week the breakout was witnessed and Nifty rose more than 2%, in line with our expectation. Nifty wrapped the week on positive note and managed to closed at 5,948.75 level. Nifty is forming double bottom pattern on daily chart which is a bullish signal for market. A breakout would be confirmed of this pattern if Nifty trades above 6,060, in that case upside could be seen more than 200 points to 6,300 level. For the coming week resistance for Nifty seems at 5,980-6040 while support stand at 5,907-5,857 level. On upside if level of 5,980 breaches decisively then we could see rise up to mark of 6,040, on the lower side if level of 5,907 is breaches then Nifty could retrace up to support of 5,800 mark. Bullish Trend can only be confirmed if Nifty trades above 6,040 level.
Technical indicators like MACD, RSI and stochastic are also supporting its uptrend move. MACD showing positive divergence and crossing the signal line (9 Days exponential moving average) from the below. RSI and stochastic has reversed from the oversold zone which indicates suggest a positive bias may expect in the market.
Technical Pick
1. Amtek Auto: (Buy)
2. TCS: (Buy)
3. Genesys: (Buy)
4. Venky: (Sell)
Higher advance tax payment by corporates and reduction in SLR by RBI could lift buying sentiments
Markets may take a strong bounce back from the current level as higher advance tax payment from Indian companies could lift the buying sentiment in market. The time is right to pick up fundamentally sound stocks which may have got beaten down along with their peers. Companies in sectors that are able to pass on their cost increases to consumers may enjoy greater stock market return. Further, companies focused on the domestic economy & consumption could continue to do well and get a higher rating than companies which are more depend on global sentiments. The RBI has decided to reduce the SLR of scheduled commercial banks from 25% of their NDTL to 24% with effect from December 18, 2010 and to conduct open market operations (OMO) auctions for purchase of government securities. The above two measures are expected to inject liquidity Rs 48,000 crore in economy and boost to stock prices. Cement, Auto, Banking, Realty and Capital goods sectors could be good bet for investors.
Fundamental Pick
1. Allahabad Bank. (Buy)
2. V.I.P Industries Ltd. (Buy)
European Union leaders summit and economic data will drive global market
Global equity markets edged higher after Fed left interest rates unchanged at 0-0.25% and also kept its asset purchase program at USD 600 billion. Also, FOMC’s comment that economy is continuing to improve. Further, investors were presented with encouraging economic data, which was further boosted the market sentiments. Looking ahead to next week, a bunch of US economic indicators are set for release on Thrusday, including jobless claims, housing starts and Philadelphia area manufacturing activity is likely to drive trading. Further, all eyes will turn to the two days European Union leaders summit. EU learders will discuss possible further steps to tackle the debt crisis that has already hit Greece and Ireland and threatens to spread to Portugal and Spain.
Rs 480 billion liquidity infuse by RBI may push up bond prices
Bond prices are expected to edge higher after RBI left key interest rates unchanged but announced measures to ease the system. RBI left repo rate, reverse repo rate and CRR unchanged at 6.25%, 5.25% and 6% respectively. However, the central bank cut the SLR for banks to 24% from 25% earlier which will effective from December 18, 2010. SLR cut along-with open market operations is pegged to infuse up to Rs 480 billion in the next one month in the banking system.
Crude oil prices may tread upwards, gold prices likely to fall
The outlook for the crude oil prices looks strong in the coming week. The prices are likely to be impacted by the reported fall in the crude inventory, which may drag the crude oil prices further higher. The gold prices are likely to fall in the coming week. The dollar is likely to upsurge on the back of strong US economic data that may pressurise the yellow metal lower.
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