04 April,2011 07:22 AM IST | | Alex K Mathews
Markets rallied towards 5900, with bulls in full command last week, never giving a chance for the bears to show up. Markets around the world were positive with most of them trading above their respective 200 Daily Moving Average (DMA).
Meanwhile, crude, which was down during the last few days simply pumped up gains towards the end of the week to touch the highest level of $107 since October 2008.
This kept the sentiment little bit down on Friday. Civil war in Libya is now becoming a problem for the rest of the world. Libyan dictator, Muammar Gaddafi is still adamant on his decision to stay and fight the rebels.
Japan is trying its best to recover from the worst tsunami and earthquake that devastated the country. There are growing concerns of nuclear radiation from three of the nuclear plants in Japan, which were destroyed by the earthquake and the tsunami.
Impact
During last week, we saw food inflation easing a bit at 9.5 per cent against 10.05 per cent. This had a positive impact on rate sensitive sectors, as fear of further rate hike cooled a bit. However, spurting oil prices will definitely compel the authorities to think otherwise.
We should also keep in mind that, fuel price hike is not being considered at present, as some of the states are going in for state elections. The trade balance figures, which came in recently showed that exports rose by 49.7 per cent to $23.5 billion in February 2011 compared to last year andu00a0 imports rose by 21.2 per cent to $31.7 billion. Hotel stocks like Hotel Leela, Viceroy Hotels and Royal Orchid are looking very strong on the charts.
Last week, we saw the government relaxing Foreign Direct Investment (FDI) norms further by permitting issuance of equity to overseas investors against imported capital goods and machinery. This is a positive move for those companies, which want to form Joint Ventures (JVs) or technical collaborations, and this will boost cash inflow into the country.
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Friday was the day for auto sales numbers and it was good to watch them post decent sales numbers. Tata motors posted 11 per cent jump in their March sales. Maruti's sales rose by 28 per cent in March whereas in the case of TVS Motors total sales jumped 28 per cent.
Exhausted
Global markets, even though positive, seemed to be a little exhausted from the recent rally. In the case of Nifty, it faced resistance at around 5909 and witnessed some profit booking. The outlook for Nifty is positive, but given the present overbought situation, we may see a consolidation around 5700-5800 levels before we go in for the next round of upside.
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Nifty is having support at around 5778, 5754 and 5726 levels. The medium term target for Nifty would be at 6000-6100 levels.u00a0 So price corrections can be utilised to buy Nifty 5900 call options (April).u00a0 Creating bull spread with call options is also advisable.u00a0
Buying Nifty April 5900 call option and selling 6100 Nifty April call option is a good example of bull spread. On the stock option segment, one can consider to buy Reliance call options, because the stock is likely to break Rs.1100 in the short term.
Support
Global economic data was supporting the uptrend with the US personal spending up 0.7 per cent against 0.3 per cent and pending home sales up 2.1 per cent against -2.8 per cent. The Japanese unemployment rate decreased to 4.6 per cent against 4.9 per cent and industrial production rose to 0.4 per cent against an estimated 0.1 per cent.
But initial jobless claims in the US rose to 388000 against an estimated 380000. Also the US CB consumer confidence was down 63.4 against 72 previously. In the commodity space, silver is targeting towards $38.65 and crude towards $ 108.89 and $ 111.54.
The author may have a vested interest in investments he has recommended. Feel free to e-mail him at alex@geojit.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
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