Recovery on Dalal Street may continue on global easing

MUMBAI: The relative calm on Dalal Street in the past few days may extend to the week ahead — at least in the early part — as jitters in the global bond markets have been showing some signs of easing and the recent foreign institutional selling has slowed. Investors will go through the minutes of US Fed’s rate-setting meeting due on Wednesday with great interest for possible hints on when would the US central bank start raising rates.

“The chances of rate tightening have increased because the first quarter employment cost index has shown the biggest yearly gains since 2008,” said Christopher Wood, managing director and chief strategist of CLSA. “Janet Yellen warning about stock market valuations also suggest that she might be contemplating to raise rates.”

This week, blue-chips such as SBI, ITC, Coal India, Tata Steel and Bajaj Auto will announce their results. Technical analysts say charts are pointing to some more gains this week. “The near-term trend for markets remain upwards with a Nifty target of 8,340,” said Gajendra Prabu, technical research analyst at HDFC Securities.

“If Nifty breaks out above 8,356, then the index target of 8,425–8,500 will be eyed by traders.” Nifty gained a little less than 1% during the past week to close at 8,262. Sensex closed at 27,324 on Friday.

Savvy traders in derivatives market have constructed fresh long positions in PSU banks after select lenders such as OBC, BoB, and Union Bank reported results that were better than expected. Traders are also betting that the RBI will reduce interest rates in its monetary policy meet scheduled for June 2.

“We expect both private and PSU banks to witness purchase next week, with SBI earnings remaining in focus,” said Ravi Shenoy, assistant vice president at Motilal Oswal Securities.

“The current recovery may extend Nifty towards 8,450 levels in the days to come, amid choppy market,” said Amit Gupta, head of derivatives at ICICI Direct. “Traders should maintain positive bias if Nifty remain above 8,100 levels.”