Stocks to remain upbeat next week; Nifty resistance seen at 2900

>> Saturday, November 29, 2008

A resilient Mumbai got back to its feet Friday after terrorist attacks tried to handicap India's financial hub. Shrugging off the panic situation that gripped the city, the Indian bourses put up a good show and analysts feel the upmove will continue in the forthcoming week as well. 

"It is heartening to see the market closing above 2650 levels despite all the negativity around. I expect the pullback rally to continue with resistance pegged around 2900-3000 on the Nifty and around 9500 levels on the Sensex. Selective buying in specific sectors like power is advised," said Hitesh Sheth, head-technical research at Prabhudas Lilladher. 

Despite a modest slowdown, India's economic performance in the September quarter was impressive, as its growth rate surprised on the upside at a time when most economies around the world are reporting shockingly weak GDP numbers. This gave further impetus to market sentiment Friday. 

However, Moody's feels that the solid growth pace in the September quarter does not mean that India is immune from the global downturn. 

"As the world has become increasingly interconnected, no economy can escape from this severe global financial tsunami. The recession in several major economies now foreshadows a tough time ahead for India. Prospects for the December quarter and much of 2009 are grim, and a sharp deceleration in India's GDP growth is expected in the final three months of this year," warns Sherman Chan, economist at Moody's 

Chan added that India's GDP growth for the next four quarters will certainly slip below the 7% mark and may even test the 6% mark around mid-2009. 

Meanwhile, global rating agency Standard & Poor's stated that attacks were an isolated case and that it does not expect any negative implications on India's macro economic activities or the government's fiscal position from the attacks. 

"The terrorist act will have limited impact on markets. And given that our GDP came in better than expected, markets are likely to be bullish in the coming week. Nifty has a strong support at 2600. Rollovers were also healthy with good build-up of long positions," said Ramesh Agarwal of Global One Advisory. 

On a provisional basis, the Nifty rollover of positions from November to December series stood at 64% while marketwide rollover stood at 71% on the current month's F&O expiry. 

In the cash market, Bombay Stock Exchange's Sensex ended at 8,915.21, up 1.99 per cent or 177.51 points from the previous week while National Stock Exchange's Nifty closed 61.65 points or 2.28 per cent at 2755.10. 

On the other hand, with inflation gradually easing, all eyes are on the Reserve Bank of India to cut rates in order to sustain demand. However, facing a large debt burden, it is difficult for the government to be as aggressive as they would like in boosting economic activity. Inflation edged lower to 8.84 percent for the week ended November 15 from 8.90 the previous week. 

Meanwhile, the world will be watching with great interest on the kind of sales figures in the US over the weekend. "If we see a growth of 3 per cent over last year same store sales, we could have a global stock market rally. However, if sales fall below 3 per cent, a visit on the October lows will be on the cards," said VK Sharma of Anagram Stock Broking. 

The day after the Thanksgiving holiday is commonly known as 'black Friday', not because of any grim association, but because it is the day that retailers usually move out of the red and into profitability for the year. The period between Thanksgiving and Christmas accounts for between 40% and 50% of annual retail sales in the US. 

Analysts are expecting one of the toughest holiday seasons in decades and Friday's sales figures will test the strength of consumer confidence. Many took the unusual step of opening yesterday on the Thanksgiving holiday in the hope of stimulating extra sales. - ET