Markets displayed a strong comeback last week. Sentiment was fairly bullish as Nifty closed above 9950. The geopolitical sentiment had subsided. Sentiment did take a hit mid-week when markets fell on Tuesday. However, the very next day there was bounce. Expiry week was closed with minor 136 point fall on Nifty for August. September has opened up with a positive start. Rollovers were mixed and some short covering was seen.
Technically speaking Nifty managed to close above 9950. This was the point of last return. It also defended its 50-day EMA around 9800 levels. The 10k mark seems to be a reality again. The only resistance now is the 10100-10150 region. It will take some strength for that to give way. There is all likely hood of a test of the last top around 10100. Indicators however need to confirm a new rally or there can be a reversal on the weekly charts.
Fundamentally the TTM is around its historical highs. Nifty has not had any meaningful earnings growth. Hope and liquidity have kept the markets afloat. GDP number came in at 5.7% which was lower in almost 3-4 years. This does not bode well. FII selling has cooled off. DII continues to pump in money that is helping the market. Having said that , this is till a stock picker’s market.
Globally, some jitters are bound to happen. Harvey has struck the gas/oil reserves in Texas and supply is cut. This temporary jolt is likely to have its effect on gas prices across the globe. This in turn will affect the PVC, CPVC manufacturers. Although temporary this can dent margins of lot of business. Earthquake was felt in the Asia pacific region. Creating a speculation that it was a nuclear missile test. One has to see how Japan and rest of Asia react to this.
Sector wise, Metals continues to be the strongest sector. Shanghai steel has had a splendid rally. Most of the steel players are enjoying a classic tailwind. Pharma will continue to be in good shape. News flow likely to turn positive one after the other. Nifty pharma index should be on its way towards 9300 and then 10k. One can continue to pick pharma cos wisely.