Stress Test Effect – What will Be Market Next Week
Markets are likely to remain range bound in the near term but with good buying coming in from FIIs there is a strong possibility of the index crossing 5,500 levels soon. Globally also the results of the stress tests in Europe have been by and large moderately positive with only seven of 91 European banks flunking the `stress tests` aimed at clearing up market fears about the strength of the continent`s banking system amid the debt crisis,`` notes the brokerage firm Anagram.
Seven European banks would not be strong enough to withstand another recession and would face a capital shortfall of 3.5 billion euros (USD 4.5 billion).
From a pure valuation basis, corporate results for Q1 FY2010-11 have been much ahead of broad market expectations with sectors like banking, auto components, capital goods, and power equipments showing strong profit growth.
In important corporate news next week, the Q1 results of Reliance will be awaited strongly on this Tuesday while the forthcoming credit policy on the Jul. 27, 2010 will be eagerly awaited by the market on whether interest rates will be tweaked up further.
We continue to remain positive on the markets and suggest maintaining long positions on the NIFTY with the support coming at 5,353, which is the immediate previous bottom. On the upside, the NIFTY has a resistance at around 5,515 in the near term.
The markets witnessed a small up move through the week with the NIFTY closing at 5,449 levels on the back of moderately positive global news flows from the US and Europe.
The results of the stress test of European banks due late on Friday, Jul. 23, 2010, will set the tone for global equity markets early next week. Closer home, investors will watch for any surprises in central bank`s monetary policy review on Tuesday, Jul. 27, 2010. The market has already discounted a 25 basis points rate hike in key short term rates by the Reserve Bank of India. Volatility may rise as traders roll over positions in the derivatives segment from the near-month July 2010 contracts to August 2010 contracts ahead of the expiry of the near-month July 2010 derivatives contracts on Thursday, Jul. 29, 2010. Back home, among the key corporate results, Maruti Suzuki India will announce its Q1 result on Saturday, 24 July 2010. Sterlite Industries and NTPC will announce Q1 results on Monday, Jul. 26, 2010. Larsen & Toubro, Reliance Industries and Hindustan Unilever`s Q1 results are due on Tuesday 27 July 210. DLF, Mahindra & Mahindra and Jindal Steel and Power`s Q1 results are due on Jul. 28, 2010. Hero Honda Motors and ONGC will be announcing Q1 result on Thursday, Jul. 28, 2010. Therefore traders are advised to have a close look on global outlook and may book profits near 5,500-5,530 and wait for a decent correction to re-enter. On the flip side we still maintain our previous approach of 5,300 as intra day support for any down swing. Any drift below this level may dampens the current Euphoria however 5,225 could be the next comfort level where we might see some bounce back,`` said the broking house Mansukh.
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