Macroeconomics to dictate terms

Buoyed by the India Meteorological Department (IMD) upgrading the prospect of normal monsoon, good Q4 earnings, renewed buying from FIIs and positive reforms push from the government, markets zoomed to new life highs during the week ended.

The benchmark indices the Sensex and the Nifty gained sharply by 329 points and 116 points to close at 30,188 and 9,401 respectively.

Renewed buying from FIIs boosted sentiment. It is pertinent to observe that withdrawals by FIIs in the previous month did not stop the indices from reaching historic highs.

Accelerating domestic flows have begun to create a “powerful offset” against capital outflows. Indian exports are defying a firm rupee, riding a rise in global growth. Exports rose to a six year high in March and, for now, that upward trend is tipped to continue as the world economy chugs along and foreign direct investment boosts productivity and stabilizes the economy.

Near term market direction will be dictated by Q4 earnings, macroeconomic data like IIP and WPI numbers, sector specific news in pharma and IT sectors, FII activity and global cues. The base year for factory output and wholesale prices has been changed to 2011-12 from 2004-2005.

The new base for industrial production comprises 809 items. The data is more comprehensive and gives the RBI a better idea of the economy’s output gap allowing it to raise or lower interest rates as necessary.

For the week ahead, chartists predict trading range of 29,800-30,500 and 9,250-9,525 for the benchmark indices. Support for the indices evident at 30,000 & 29,800 and 9,335 & 9,275.