Market Watch: Reasons why Nifty can hit 5600 in a month
Experts believe a strong gush of liquidity and optimism could push the Nifty to 5600 in a month.
July 06, 2012 / 08:46 IST
Moneycontrol Bureau
When the bell tolled on Dalal Street this morning, it seemed like we were in for yet another quiet day of trade. However, comments from the Mauritius Foreign Minister late afternoon pushed things into fourth gear, and helped Indian benchmarks post strong gains for the day.Indian Foreign Minister SM Krishna and the Mauritius Foreign Minister today said that India and Mauritius will hold talks on August 27-28 to discuss issues of mutual economic interest. Among these will be the contentious issue of double taxation. Mauritius has made offers to India with respect to tax treaty revision which ensure compliance with best international practices.On the back of this, the Sensex jumped to an intraday high of 17,562, but pared down gains to end the day 76 points higher at 17,533. Meanwhile, the Nifty managed to successfully take out the key technical resistance of 5,320, to end the day up 20 points.CLICK HERE to catch on today's stock action..Investors today were cautious ahead of the European Central Bank’s meet. Expectations are that the central bank will deliver a 25 basis point rate cut to boost economic growth in the eurozone. But a few also hold hopes that it announces other measures, which could include a cut in its deposit rate to encourage banks to lend more of the cash they hold.Experts say monetary easing by the ECB is already priced in by markets, and that the only risk is if it does very little apart from that.According to Mehraboon Irani of Nirmal Bang Securities, a rate cut by the ECB will further improve sentiment in the market because of the liquidity boost that it will give. However, he believes the fundamentals will still lag. “GDP growth is at the worst level in the last nine years, inflation is high, IIP numbers are poor, current account deficit is at an all time high and the rupee at an all time low,” he pointed out. Despite this, the Indian markets have shown a lot of resilience, and therefore he believes the time has come to become optimistic about equities. “Post the European summit, post the change in the finance ministry portfolio, I think market has now become optimistic, so I would say liquidity and sentiment is driving the market,” he said.Due to the optimistic sentiment, Irani says he will not be surprised if the Nifty climbs to 5600 in the next month or so. However, he advises long-term investors against buying into the current market because of the lag in fundamentals.Technical analyst Sudarshan Sukhani of s2analystics.com is also of the view that the current trend in the market is up, and therefore advises short-term traders to take up long positions with strong stop loss levels. “The trend is to go long, but if the market slides below 5,270 we should get out,” he said.Overall, experts believe the market is waiting for positive cues, whether domestic or global, to move higher and test 5,360-5,370 levels. Post that, they believe a steady uptrend is on the cards.Anisha Mappat
anisha.mappat@network18online.com Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
