Expect volatility in the coming fortnight: Dilip Bang

By Dilip Bang of Nirmal Bang

In the last fortnight, better-than-expected PMI numbers as well as improved auto sales on a month-on-month (m-o-m) basis in the US indicated that its economy continues to recover.

On the domestic front, the quarterly earnings results of some corporates were released in the previous fortnight. The results of most of these companies were in line with market expectations, except Infosys Ltd, which underperformed and Tata Consultancy Services (TCS), which over performed.

During this period, the Reserve Bank of India (RBI) too announced rate cuts in its monetary policy review. The central bank lowered repo rate by 50 basis points (bps) to 8%, which was more than expected.

The RBI, however, kept the cash reserve ratio (CRR) unchanged at 4.75%. Yet, expectations of further rate cut are low due to a high inflationary situation.

Further, Standard & Poor’s cut its outlook on India’s long-term debt to negative in the past fortnight. The credit rating agency also warned of a possible credit downgrade.

The Indian rupee on the other hand has been consistently depreciating due to concerns over reduced capital inflows from FIIs on account of the General Anti-Avoidance Rules (GAAR) issue. Due to opposition from foreign investors to GAAR, Indian indices have been underperforming in comparison with international indices.

The GAAR issue is likely to weigh on the markets and, hence, we may see volatility in the coming fortnight. The Nifty has support at the 5,120 level. If it breaks this level, then market participants should avoid buying. The upper resistance is at the 5,420 level. Trading and overnight positions should be avoided.

Stocks that can be looked at from an investment perspective are Raymond Ltd (LTP:  Rs 404.45), Ajanta Pharma Ltd (LTP:  Rs 552.75), Tube Investments of India Ltd (LTP:  Rs 148), Sterling Holiday Resorts (India) Ltd (LTP:  Rs 85.50), LIC Housing Finance Ltd (LTP:  Rs 258.45) and Orchid Chemicals and Pharmaceuticals Ltd (LTP:  Rs 181.10).

In the coming fortnight, the markets are expecting an outcome on the GAAR issue. Also, elections in France and Greece in the coming months could have a bearing on the global markets.

Source: Nirmal Bang's Beyond Market

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