Will Rajan Oblige Markets Again? - Karvy

After taking a bow at Raghuram Rajan pep-talk, the markets seem to have lost the fi zz. The fl attish markets are now waiting for the action-packed events next week. The WPI data on Monday, the US Fed's decision on tapering of stimulus on September 18 and RBI policy review on September 20 are expected to give the muchawaited direction to the markets. The RBI's policy review, the fi rst one by Rajan, will go into determining how he plans to walk the talk. Markets will be eagerly watching whether the central bank will scale back its liquidity tightening measures or maintain a status quo like his predecessor?

There is little to cheer about the economy. Despite the rise in July IIP, recovery in rupee, narrowing down of trade deficit and a moderate fall in August retail inflation, one can't jump to a conclusion that pains of the economy are over.

The Nifty opened on Tuesday over 2% higher around the 5800 mark. It managed to continue the momentum through the week and made a high at 5930. The index has now bounced over 15% from its recent bottom of 5120 in two weeks. The index continues to be supported by the Bank Nifty, which has surged almost 25% in the same period. Realty, Capital Goods and FMCG sectors saw healthy participation and outperformed benchmark indices. On the other hand, Oil & Gas, Technology sectoral Indices underperformed the benchmark indices. Long positions can be assumed in Realty, Capital Goods, Banking and FMCG stocks if the Nifty sustains above 5800 levels in the coming week. Long positions can also be initiated in the Pharma space on dips. Short positions can be accumulated in Oil & Gas, Technology and Consumer Durables stocks on pullbacks since these sectors are likely to underperform broader markets in coming days. Overall, we expect the Nifty to trade in the range of 5700-6000 levels for the next week. The index is likely to test 6000 levels as long as it takes support at 200-EMA which is around 5830. Only a breach of 5750 can induce profit booking in the short term after the stupendous rally in the last two weeks. Thus, any decline in the market must add to long positions maintaining a stop loss at 5750.

Source : Equity Bulls

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