The week ahead: Markets to rebound as strong rupee improves sentiment

The week ahead could see the markets gain further as renewed buying by foreign investors continues. The rupee finished at its best level in 2 months on Friday which improved sentiment and triggered buying with Nifty regaining its 100 and 200 day moving averages (dma) and closing above them.. The markets started the week on a weak note and saw the Nifty drift down to 5,700 in a holiday-shortened week, before buying emerged. Technically the Nifty has closed above all its averages and now faces resistance at 6,050-6,100, while it finds support at 5,814, which is its 100 dma. The high beta 'Bank Nifty' was the star performer rising 3 per cent for the week against 1.27 per cent gaining by the Nifty. The Bank Nifty now faces resistance at 10,686 while it finds support at 9,883. The other notable outperformer was the CNX Reality which gained 4.58 per cent for the week and the underperformance came from the CNX FMCG, which ended the week down 1.68 per cent.. The rupee was the star performer in the emerging market basket and continued to exhibit strength as the US dollar touched 8-month lows. This triggered fund flows towards emerging markets which saw strong rallies in bonds, currencies & equities. Another reason for the rally was the prolonged US shutdown which meant that the political parties could not get consensus on passage of the important US debt ceiling being raised. This saw the dollar weaken as Federal tapering-related fears further receded which saw funds flow into other asset classes, with oil and gold also gaining.. The Indian markets saw the rupee get stronger and close at 61.44 against dollar, the 10-year government bonds also saw yields close at 8.6 per cent - their first week of gains in a month. Another positive was the Reserve Bank of India indicating open market operations (OMO) of bond buying to the extent of Rs 10,000 crore which improved sentiment. The apex bank also indicated lower cost of funds to Public sector banks for consumer credit ahead of the festive season.. Tracking the top 3 gainers on the NSE were: Ranbaxy, up 7.8 per cent, Bajaj Auto, up 6.3 per cent, and Axis bank, up 6 per cent. While the top 3 losers were: NTPC, down 3.6 per cent, ONGC, down 3.5 per cent, and HindUnilver, down 2.3 per cent.. The markets continue to exhibit strength despite serious headwinds with results season starting at the end of next week, which could possibly see the weakest earnings for majority of the stocks and sectors in the last 5-6 years on back of higher cost of funds and the weak rupee. This could cap the upside to 6,100 on the Nifty as caution would be the buzzword for the second half of October.. Disclaimer: Sanjeev Bhasin is an independent market analyst. The opinions expressed here are the personal opinions of the author. NDTV is not responsible for the accuracy, completeness, suitability or validity of any information given here. All information is provided on an as-is basis. The information, facts or opinions appearing on the blog do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.

The week ahead: Markets to rebound as strong rupee improves sentiment

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