Tuesday, July 7, 2009

Bucket Full of Expectations !!

FM hints Reforms but at a Steady Pace

An important event in Union Budget came and went by. Before its announcement by FM Pranab Mukherjee, some thought that the budget would finally pan out as a non-event. While some held the view that it would act as the final frontier for next leg of rally. Yet many others felt that this would be the last hope on which markets would sustain this high before correcting substantially.

The announcement of the Budget event was simultaneously followed by a sharp slide in equity markets- conveying that they're not satisfied with the Budget from a government which has a much clearly pronounced mandate from the public to take the Reform route after a thumping victory in the Elections.

Clearly, the markets had factored in various types of Reforms & Disinvestment agenda from the newly elected government on the centre. This time with a whiff of a relief that the coalition is much stronger to ride through the rough waters for the next 5 years.

FM Pranab Mukherjee chose to keep this Budget a low-key affair without focusing much on Reforms and Disinvestment. A clear focus of the government was reflected on the sustenance of Growth of the Economy by stimulating growth through inclusiveness of Rural programmes and policies. However, from the signs in his Budget and post-budget speech, he has affirmed the view that Disinvestment are not completely out of agenda and that they would be taken over as and when felt fit by the government depending upon the conditions.

Quite possibly, markets were factoring in too much too soon from a finance minister which is in its first few months of taking control. And, not necessary that the government should act and open-up all possible reforms in its first year of operation. It should be a gradual and a well though out process which should grow over a period of next 5 years.

Technical Stand on Markets:
(Nifty Range: 3650-3800-4250)

Nifty was range bound in 4200-4400 levels for almost 10 days. One session before the Budget, it showed signs of break-out above 4400 levels but could not sustain from the assault of a major event like Budget. In fact, post-budget the Nifty seems to have even breached the downside support around 4200-4250 zone. Now, it could be presumed that a narrow trading range of 4200-4400 is disturbed with a downside bias.

The highs of previous 2 sessions perched at Nifty 4460 will act as a strong Resistance for any possible up move. Near-term Resistance stands at Nifty 4350 level. Medium term Resistance for Nifty stands at 4650, which is a remote possibility of being tested in near term & could be ruled-out from the game as of now.

Whereas downside gates are open up to as low as Nifty 3800-3650. Nifty 3670 was the level from where the markets had bounced 600 points after positive election results. These levels could come handy as a support zone. There is a Gap of 600 points in between 3650-4350 which is partially filled upto 4150 and needs to be wrapped up fully over a period of time. Nifty targets of 3650-3800 on the downside could be a slow process or even a fast one if aided by global weakness.

In short-term horizon, Nifty target of 3800 seems quite likely as compared to 3650 levels. However, a gap fill-up upto 3650 can't be ruled out over medium term horizon.

The Above levels are forecasts for future and levels to watch out for, but not necessarily the certainty for the next market movement. These are still early days for markets and we need to see whether there will be an actual breakdown from the range as presumed and narrated above. Global cues and Quarterly results starting from next week will now play an important role in determining the trend from here.

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1 comment:


nice post on budget ..