TANMAY OBSERVES!

Weekly Nifty Update 29 Jan, 2010 by Tanmay G Purohit

Nifty has closed down 3.06% or 154points week-on-week and it has hit fresh 11-week low at 4766 which was a crucial support and it has been able to hold on to that very well. Results season for Q3 is getting over and for 1467 companies announcing results so far Sales growth has been 11.8% while Profits have grown 38%. Nifty has fallen more than 6% in Jan'10 and this correction in markets has brought Nifty P/E back to 21 which was above 23 to start this year. 

RBI raised CRR by 75bps in its monetary review on Friday but kept Repo and Rev Repo rates unchanged. The central bank lifted its WPI inflation forecast for the end of the fiscal year in March to 8.5% from 6.5%. It said it expected inflation to moderate from July, assuming a normal monsoon and global oil prices holding at current levels, but the new forecast convinced many analysts an interest rate rise was on the cards. It also lifted its forecast for GDP growth for India in the current fiscal year to 7.5% from 6%, and said that the current rate of growth was likely to be sustained in 2010-11.

RBI policy is now out of the way and next most important event would be Budget which is expected to be presented on 26 Feb and it would be interesting to see how government handles the problem of fiscal deficit which is likely to cross estimates after the government has postponed to the next fiscal auction of spectrum for 3G telephony which was expected to bring in Rs 35,000 crore to the exchequer. This deficit is a large number and even with disinvestment, it is difficult to bridge the gap in just 2 months period. India's fiscal deficit for April to December was Rs 3.09 trillion ($66.9 billion), or 77.3% of the full-year target, the government said on Friday. Major candidate for Disinvestment has been NTPC and the public issue is scheduled to start next week, pricing is awaited.

Nifty has taken support at channel as can be seen from below graph and it looks set for some bounce after this fall; next week is expected to start positively. Nifty may bounce towards 4968 which is a good resistance and above that even 5090 is not ruled out. The bounce may sustain for 2-3 sessions but if Nifty is able to close past 5090 in that period the rally may continue also. Below 4770 only the case for bounce would be negated.

Supp 4770/4688/4542 Res 4950/5040/5128

Stocks that look good for bounce :- RELIANCE, TATA STEEL, GAIL, GSPL, FERTILIZER STOCKs - DEEPAK, CHAMBAL, RCF

PSU stocks can perform when NTPC IPO succeeds - MRPL, MTNL, STC, SAIL look good on graph