Week of sharp pullback in Indian Stock Market - Karvy

It was a week of sharp pullback in the Indian stock market. The NSE's benchmark Nifty and BSE's benchmark Sensex rose more than 4%, giving succor to investors. The rally was spurred by a couple of healthy macroeconomic data fl owing all through the week, refl ecting some recovery in the domestic economy. One was related to India's exports that grew for the third month in a row while the second one was better-thanexpected WPI fi gures (the lowest in more than three years), stoking hopes of interest rate cuts by the RBI in its May 3 policy review. However, given the RBI governor's steadfastness on the matter, the markets shouldn't get overly optimistic. Subbarao could choose to see if the drop in infl ation sustains over a few more weeks.

The remarkable crash in gold prices also certainly helped the Indian equity markets. The Sensex regained the 19,000 levels after a sustained period of gloom. After the dismal Infosys quarterly results, the mood of the market perked up as heavyweights Reliance Industries and TCS posted good numbers. Falling gold and crude oil prices should help soothe nerves about the current account defi cit crisis. If prices fall further, India's CAD would go down substantially, freeing up some space for the RBI to pursue a looser monetary policy. Finance Minister, P Chidambaram expects the CAD for the 2012/13 fi scal year to be around 5% of GDP, and further come down by half in the next two years.

For the week, the Nifty held the support of 5500 level and spurted up sharply to post a four-week high of 5795 level on Thursday. The Nifty has gained about 250 points W/W, the biggest weekly gain (in absolute terms) since December 2011. The Banks, Capital Goods, Realty, FMCG and Auto had seen healthy participation outperforming the broader markets. On the other hand, IT, Metals, Pharma and Consumer Durables sectoral indices have underperformed the benchmark indices. Long positions can be assumed in Banking, Cements, Capital Goods, FMCG and Pharma if the Nifty sustains above 5750 levels in the coming week. Short positions can be accumulated in Consumer Durables, IT, Metals and Utilities if the Nifty slips below 5700 levels. Overall, we expect Nifty to trade in the range of 5600-5850 levels for the next week.

Source : Equity Bulls

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