Week ahead: Budget to set the direction for markets

Source : SIFY
By : Arun Kejriwal
Last Updated: Sat, Feb 14, 2009 09:37 hrs

Arun Kejriwal runs his own advisory firm, M/s Kejriwal Research and Investment Services Pvt Ltd. He advises HNIs, corporates and brokers on managing portfolios and investment opportunities.

He helps new promoters to tap the capital markets and also those who are keen to learn the nuances of the market. Equipped with a commerce and law degree, he has rich experience of over two decades in dealing with the markets.

Last week's trading was in different directions in the world markets and at the Indian bourses. While the US and Asian markets fell, Indian markets rose. The reason for the rise is probably expectations of a third incentive or impetus package when the interim Budget will be presented on February 16.

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Disclosures on the pledged shares are being made and the list seems to be never ending. Tatas have given disclosures about most of their companies, but till date there is no disclosure from any of the Ambani brothers. It is not whether they have pledged or not or how much is pledged, but a statement about the same becomes mandatory for all. The biggest driver for the market, which could be positive or negative trigger, is the interim Budget.

The US markets posted big losses and the Dow Jones lost 430.18 points or 5.20 %, while the Nasdaq lost a little less, 57.35 points or 3.6 % to close at 1534.36 points.

Asian markets also lost with the Hang Seng losing just 100.37 points or 0.74 % to close at 13554.67 points, with the Nikkei losing much more with a fall of 297.22 points or 3.68 % to close at 7779.40 points.

The Sensex opened the week with a bang gaining 283 points on the first day itself. The intra-week high made on Tuesday was 9724.87 points, a level, which even Friday's gain could not surpass. The Sensex gained 333.88 points or 3.59 % to close at 9634.74 points. The Nifty gained 105.25 points or 3.70 % to close at 2948.35 points.

The highlight of the week was the widespread gains that the broader indices made. The BSE Midcap and the BSE Smallcap gained 4.51 % and 3.55% respectively. In tune with the benchmark indices all the sectoral indices also gained ground with the exception of the BSE IT and the BSE FMCG, which lost marginally losing 1.4% and 0.5% respectively.

The biggest gainer was the BSE Realty, which gained a staggering 177.55 points or 12.55% to close at 1592.36 points and the BSE CG or capital goods, which gained 478.32 points or 7.88 % to close at 6547.42 points. The top gainers in the BSE Realty were DLF, which gained Rs 22.45 or 16.25% to close at Rs 160.60 and Unitech, which gained Rs 3.30, or 11.56% to close at Rs 31.85. L&T gained Rs 62.30 or 9.75 % to close at Rs 701, while BHEL gained Rs 101 or 7.39 % to close at Rs 1467. It may be mentioned here that L&T and BHEL together have a weightage of 70% one this index.

The Railway Budget, announced on Friday, was in tune with the forthcoming elections by being populist in nature. The minister announced a 2 % reduction in passenger fares across all categories of travel in mail and express trains. Index of Industrial Production numbers saw the growth rate turning negative for December.
What was particularly disturbing was the fact that the slowdown is broad based. The manufacturing sector was the worst hit where out of seventeen industries as many as ten have reported negative numbers.

The November number was also revised downwards from 2.4 % to 1.7 %. SEBI announced some new guidelines regarding the takeover code. This doesn't seem to be new set of laws, but seems to be a step in case specific pertaining to Satyam.

It is now to be seen how the Satyam board goes about inviting bids for Satyam. In the US, the $787 billion package would have been sanctioned and become law before our markets open on Monday morning, but it may be added that the Dow Jones not only fell for the week but also lost ground on Friday.

Coming to the next week, it is likely to be volatile with serious attempt to take out the physiological 10K and 3K mark in the two indices. The 13-day moving average or DMA is likely to attempt to cut the 39 DMA from below in both the Sensex and Nifty.

This crossover, if it happens, will be a positive one and could trigger a strong rally. The best opportunity for it to happen is on Tuesday, if there are positive triggers from the interim Budget or vote on account. FIIs have stopped their aggressive selling and their net weekly purchase or sales have slowed down considerably. It appears they also are waiting for the policies, which are being announced prior to the elections, before taking any calls. They would like to act once they are clear about the likely impact it would have on the markets.

The Sensex has support at the 9551 levels and then between 9395 and 9400 levels. The next support is around the 9000-9005 levels and then finally at the low of January 23 of 8631 levels. The BSE Sensex has resistance at 9725, which is the previous week's high, then around the 9796-8000 level, then around the 10187-10195 levels and finally at the high of January 7 of 10469.

This week is likely to be volatile, hence the range for the support and resistance has increased considerably over previous weeks. There is a possibility that if nothing happens, post the interim Budget, many of these levels may not get tested either side.

Nifty has support at 2906, then at 2870, then between 2830-2835 and finally between 2739-2742. The Nifty has very strong support at the January 23 low of 2661. It has resistance at 2980, then at 2998-3000, then at 3050 and finally at 3128. An important resistance would be the high of January 7 of 3147.

In conclusion, this week is likely to see the market attempting yet again to break upwards of the physiological 10K on the Sensex and the 3K on the Nifty respectively.

This is probably its best chance to do so, as you have an interim Budget to be tabled on Monday, the US bailout plan to become law tonight and the possibility of a technical rally on account of the averages crossover is likely to happen.

If the markets do not break upwards on Monday, we could see yet another fall happening during the week. Readers would be advised to see the effect of the Budget and then play the markets. Clarity post this event is a certainty as the buildup over the last two weeks is for this event.

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SEBI disclaimer: I have no investments in any of the stocks referred above.

The writer invites comments at kejriwalarun@rediffmail.com

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