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Sunday, July 1, 2012

Nifty to gravitate toward 5400 levels next week: Analysts

NEW DELHI: Indian markets started the July series with big gains and have snapped out of the 5170-5050 range seen in most part of June.

"We believe Friday's move represents a decisive breakout and is likely to be followed up with more buying in the week that is to come," Kunal Saraogi, CEO at, said.

"We expect the Nifty to gravitate toward 5400 levels in the next week on the back of improving global and domestic cues. Markets seem to have liked the government's initiative on GAAR and Vodafone tax issue, and we expect these signal a reprieve from the policy paralysis that has plagued the government till now," Saraogi added.

Both the Sensex and Nifty registered a growth of over 7 percent in June supported by positive global cues and clarification on GAAR.

"It was an excellent comeback for the key indices to close the month on a positive note. We witnessed a combination of short covering as well as fresh longs entering the market," Kunal Bothra, Senior Technical Analyst - Manager Advisory at LKP Securities Ltd, said.

Technically, the Nifty is above the 200-DMA, and it can now be assumed that the markets have moved into a different band in the short term.

Bothra is of the view that bullishness will persist for the next few days as many frontline stocks are trading above their crucial DMA levels. Frontline stocks like Tata Steel, Maruti Suzuki, SBI and Kotak Bank can continue the uptrend next week.

"July will be difficult for the benchmarks after registering a 7 per cent rise in June as a below average monsoon and slowing auto sales will weigh," A.K. Prabhakar, Senior Vice President - Equity Research at Anand Rathi, said.

"The eurozone gave a positive surprise but how long the market will hold on to these levels we have to wait and watch. The GAAR development is below expectations and the Nifty could trade between 5000 and 5400 in July," Prabhakar added.

Prabhakar is of the view that the results season might put pressure on indices. Private banks are likely to post good results, while FMCG and pharma can surprise on the positive side.

The Sensex closed more than 400 points higher on Friday and registered gains of over 7 percent for June. However, analysts are of the view that fundamentals of the economy are still weak and markets are likely to be rangebound.

"The Indian market remains weak fundamentally as the macroeconomic situation is still the same as last month and with a change of guard expected, political uncertainty remains," Yogeshwar Vashishtha of Online Trading Academy said.

Vashishtha is of the view that the international scenario is better now and might take the price technically into the next supply zone of the weekly chart, which is from 5200 to 5350. However, no big rally is expected and market is likely to be rangebound, he added.

Markets will also be eyeing the Reserve Bank of India's policy meet due 31 July. According to experts, rate-sensitive stocks have already picked up traction ahead of the event.

"Ahead of the key event, rate-sensitive stocks have started to outperform the market. The RBI has already indicated that some action can come from the central bank if inflation cools down and our expectation is built on CRR or OMO rate cuts which could bring positive surprise to markets," Prabhakar added.

Vashishtha said the central bank does not have much room for rate cuts and the market would be looking forward to some growth boosting measures. "Unless major policy decisions are taken it might not be a very significant event," he added.
(The views and recommendations expressed in this section are the analysts' and do not represent those of 
curtsy-Economic Times 

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