mahikarnam

Bears may have to say goodbye to equities, at least for the time being. The Nifty has been forming higher top and higher bottom patterns in the last few weeks, suggesting an impending uptrend.

If the Nifty crosses its key resistance level of 4615 and stays above it for more than two days, there is a possibility of an upmove to 5100 (200-Day Simple Moving Average).

Index heavyweight ONGC can lend a hand to the Nifty in times of distress in the coming days, because it already has breached the key resistance level of its 200-DMA (daily moving average) of Rs 1,046 and is targeting Rs 1,250 in the medium term. ONGC has strong base at Rs 1,007 and Rs 971. Another index component, HDFC is also likely to flare up in coming days toward Rs 2,852 levels.

Fundamentally, anticipation of lower inflation and a resultant halt in interest rate hikes may bring fresh lease of life into banking stocks. These sector stocks were heavily beaten down by bear market operators, but sooner or later, bulls will start accumulating banking sector stocks.

SBI, Punjab National Bank, Indian Bank, ICICI Bank and HDFC Bank are looking very strong on charts. Bank Nifty is on the verge of breaking the 7015-mark and if this happens, then it has the capacity to break the 8250 levels in the short-term.

If banks stocks move up, realty sector stocks have to move up, because they have the highest correlation with banking stocks. These stocks, which hit yearly lows recently, have the potential to give 5-25% returns in the short-to- medium term.

In case of any upside, DLF will lead the rally, followed by HDIL, Unitech and Lanco Infra.

Aggressive investors can look at Reliance Infrastructure, NTPC, which have high beta on Nifty. A share with high beta is perceived to rise or fall more sharply against the broader indices in the event of sharp movements.

Reliance Infra has 1.75 beta. So, if the Nifty gives a return of 10%, then the investment in Reliance Infra will fetch you a return of 17.5%. The stock has the capacity to break Rs 1,400-mark.

Capital goods shares such as L&T, BHEL, ABB and Siemens are showing break-out patterns. L&T looks extremely bullish and it is trading above its 100-day moving average of Rs 2,720, and is targeting Rs.3,308 (200-day simple moving average).

Cement and steel are the two sectors on the Nifty that are likely to remain subdued for a few days more, but still value-buying can be expected at lower levels because of their inherent strength.

In the past few days, we have witnessed profit-booking in crude oil and other dollar-denominated commodities. Strengthening of dollar versus euro is affecting commodity prices and their fall may help equity markets across the globe.

Crude has lost the key support at $117 a barrel, and may test $108 or $103 level in the short run. Bull liquidation can be seen if it falls below $108-mark.


Severe fall in crude prices will have negative impact on gold, which is trading at $855 and may fall further toward $845-825 levels.

Gold is the commodity which is bought during the times of high inflation because investors usually buy gold as an inflationary hedge. If gold prices fall, then silver and other base metal prices are also expected to come down, which will hopefully bring down the inflation.

Both Dow and Nasdaq are giving firm uptrend signals, which will further negatively impact the commodities market. Inflation in India is steadily increasing, but it can come down if the crude and other basic metal prices fall in the coming days.

Weakness in commodity prices and dollars strength against euro will boost the institutional investor’s appetite for equities. Hopefully, they may increase equity exposure at this juncture rather than investing in commodities.