Market Analysis: Can Nifty hop, skip & jump over 5400?

It was a rather quiet start to the week for equities, with Indian benchmarks taking some time off to catch their breath after the stellar rally last week.

The Sensex and Nifty gained 1.5% on Friday, and over 2.7% for the week, as strong global and domestic cues helped push the Nifty over the 5200 mark. For Monday, however, the Sensex fell 31 points to close at 17,398, and the Nifty closed flat at 5,278.

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Before Friday, the Nifty was finding it difficult to decisively take out the 5200 level. But government action at home and statements from European leaders lifted sprits, and markets along with it. Foreign institutional investors net purchased over Rs 3,000 crore on Friday, the highest single day buy amount this financial year.

So despite a few hiccups, the month of June has been very positive for global markets, mainly on the back of monetary easing expectations from central banks.

But with the market having rallied over 14% in 2012, investors are cautious and worried if gains could stall going forward.

According to Ambareesh Baliga of Way2Wealth, today’s underperformance is because of the bounce back in crude prices and uncertain monsoon. He says the road ahead is dependent upon this season’s rainfall, and more importantly, any further action from the government. “Action at ground level from Manmohan Singh and his team, whether we have that so called supplementary budget coming in and those policy reforms are the two things to be kept in mind,” he said.

Looking at the mood in the market, Baliga says it will be a smooth ride for investors from here till 5400, but that the market will face some trouble going over that hurdle. “For that to be crossed, I think you need to have newsflow on the monsoon and policy action,” he said.

From a short-term perspective, Sudarshan Sukhani of s2analystics.com says the trade continues to remain on the long side. Even though there was a bit of volatility today, he says traders should look to build on their long positions.

All eyes on earnings & macros

July brings with it earnings season, and a whole host of macro economic data like the inflation, industrial growth (IIP) etc.

There are no high hopes from earnings season this time round, and most of the hopes are already in the price, so Baliga expects it to be inconsequential to the market. “But yes, if it is better than expected, that’s a positive trigger,” he added.

He believes the focus is going to be on policy initiatives by the government, especially after the change of guard at the Finance Ministry post Pranab Mukherjee’s resignation.

Even globally, everyone is looking towards the central banks for further easing to ease the liquidity scenario.

Therefore, at current levels, experts believe it is a good time to dip your toes into the equity market.

Anisha Mappat
anisha.mappat@network18online.com