The Week Ahead: S&P Upgrade, PM Modi's US Visit to Improve Market Sentiment

The week ahead could see improvement in sentiments after the pull-back rally led by the S&P raising India's sovereign credit rating to 'stable' from 'negative'. The other sentiment driver is the Prime Minister Modi's visit to the US which started over the weekend.

After rallying for six consecutive weeks, the Indian equity markets have finally cooled off from its all-time peak. Foreign Institutional Investor selling, weakness of the Indian rupee against the US Dollar, Supreme Court's decision on coal block allocations and deferment of the new gas pricing dampened the sentiment on the street. If that was not enough, fresh short positions and higher degree of short rolls in the banking and oil & gas sectors led to the September series ending in the red; something which has happened for the first time in seven months.

Looking ahead the coming week promises to be full of action. The interest rate sensitive stocks will be in focus, ahead of the RBI policy meet which is scheduled to be held on September 30. In addition, fiscal deficit data for the month of August will also be closely watched.

Technically the Nifty has managed to close above the 50 dma (day moving average) at 7885 and now on the upside has to close above 8030 for resumption of the uptrend. The bank nifty also managed to close above its breakout level and if it can sustain over 15650 then we could see levels of 16200 in the coming week.

In the week ended Friday, 26 September 2014, the 30-share S&P BSE Sensex fell 464.06 points or 1.71 per cent to 26,626.32. The 50-unit CNX Nifty slipped 152.60 points or 1.88 per cent to 7,968.85. The high beta 'bank nifty' was down 3.37 per cent, while the CNX Metal Index was down 4.81 per cent. The worst performer was the CNX PSU Bank Index down 6.81 per cent for the week. The outperformance came from the CNX FMCG Index which ended the week with gains of 2.05 per cent.

Tracking the top 3 gainers on the Nifty were ITC up 3.4%, HCL Tech up 2.4 per cent and ONGC up 2 per cent, while the top 3 losers were JSPL down 12.7 per cent, BHEL down 9.3 per cent and PNB down 8.5 per cent.

Globally, Dow Jones Index and Nasdaq Index saw volatile movements as most investors turned vary on the uncomfortable valuations being attached to the much in demand 'e-commerce' and 'social-media' sector, which actually bore the brunt of the selling this week. Oil prices were range-bound while gold prices moved up as a natural corollary to weakness in equities.

The key other than Prime Minister Modi's visit to the US is the RBI policy meet which can actually improve investor and corporate sentiment by reducing the 'repo' or reducing the CRR (cash reserve ratio).

The investors can do well by buying some of the PSU banks which have fallen more than justified and which could do well in the coming quarter on the back of improvement in corporate spending and rise in individual spending which will increase credit demand.

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.