Indian stocks to see soft opening: Monday Market Preview

Investors will focus on the quarterly earnings seasons amid signs of a slowdown in the domestic economy

Global cues indicate a soft opening for the Indian market, as the US market closed lower on Friday on a less-than-expected rise in job numbers and fears of the government defaulting on its debt. Markets in Asia were lower in early trade on Monday on concerns that the slower growth in the world’s largest economy would impact exporters in the region. The SGX Nifty was down 13 points to 5,651 compared to its previous close of 5,664.

The market fluctuated between losses and gains last week, mainly on global cues. While positive economic indicators from the US kept hopes of the global recovery alive, the Moody's downgrade of Portugal's bond rating to junk capped the gains. The market ended the week with a gain of 1%.

On Monday, the market recorded modest gains, riding on the news of robust US manufacturing data for April. The indices settled lower on the next two days, on concerns over the downgrade of Portugal's bond rating. On Thursday, the announcement of a decline in the weekly food inflation numbers helped the market overcome negative global cues. However, the indices gave up more than half of those gains on the last trading day of the week.

Overall, the Sensex closed the week up 95 points at 18,858 and the Nifty put on 33 points at 5,661. The Nifty, which has been trading above the 5,600 mark all week, is expected to move between 5,600 and 5,800 over the next few days.

Wall Street closed lower on Friday on a less-than-expected rise in employment numbers for June. Non-farm payrolls rose only 18,000, according to data released by the Labor Department. The unemployment rate climbed to 9.2%, the highest since December 2010, from 9.1% in May. However, earlier data like retail sales figures and a rise in manufacturing numbers kept hopes alive. Investors are now tuned to the earnings season which kicks off this week.

The Dow declined 62.29 points (0.49%) to 12,657.20 at the end of trade. The S&P 500 fell by 9.42 points (0.70%) to 1,343.80. The Nasdaq closed 12.85 points (0.45%) lower at 2,859.81.

Lower-than-expected jobs data released by the US Labor Department on Friday and the Chinese monthly inflation data announced on Saturday weighed on the Asian markets which were trading lower in early trade on Monday. The lingering debt crisis in Europe also added to the woes.

The Shanghai Composite fell 0.54%, the Hang Seng declined 1%, the Jakarta Composite was 0.34% lower, the KLSE Composite lost 0.49%, the Nikkei 225 fell by 0.48%, the Straits Times declined 0.87%, the Seoul Composite fell by 0.89% and the Taiwan Weighted was trading 0.95% lower in early trade on Monday.

Back home, Reliance Industries (RIL) has said that it was not being given enough time to respond to the Comptroller and Auditor General’s (CAG) observations on KG-D6 gas fields.

In a letter to the petroleum ministry, RIL senior vice president (commercial) B Ganguly stated that the time CAG has allocated to the company at the 12th July Exit Conference that will conclude the audit of RIL’s KG-D6 field cost, was ‘far too inadequate’ to answer issues raised in the audit.

Previously, the company’s executive director PMS Prasad had written to the oil secretary that CAG neither discussed finding mentioned in the draft report with RIL, nor did it raise them at the 4th June brief interaction the auditor had with the company.


Govt allows fertiliser cos to fix DAP prices

The removal of restriction would boost domestic supply of DAP in the ongoing Kharif season as the fertiliser companies are free to pass on high global prices to consumers

New Delhi: The government on Friday notified the Cabinet decision to allow fertiliser companies to fix the retail price of phosphatic (P) and potassic (K) nutrients such as DAP but asked them to keep the rates at 'reasonable level', reports PTI.

In April, the Cabinet had allowed firms to increase DAP price by up to Rs600 per tonne over and above the maximum retail price (MRP) of Rs10,750 a tonnes prevailing then.

"The market price of subsidised P and K fertilisers including DAP will be open and will be fixed by the fertiliser companies at reasonable level," the fertiliser ministry said in a notification issued yesterday.

Under the nutrient-based subsidy (NBS) regime introduced from 1 April 2010, the retail prices of 22 varieties of P & K fertilisers have been freed. For the 2011-12 fiscal, government raised NBS of P&K fertiliser to insulate companies from high global prices, but restricted them from hiking the MRP beyond Rs600 a tonne.

"The restriction was against the objective of the NBS policy. Last week, the Cabinet gave approval to remove the anomaly in the NBS policy to free P&K fertiliser prices completely," a senior fertiliser ministry official said.

The removal of restriction would boost domestic supply of DAP in the ongoing Kharif season as the fertiliser companies are free to pass on high global prices to consumers, he said.

At present, there is short supply of DAP and other P & K fertilisers as the companies have been shy of importing them due high global prices.

While the companies are entitled for import subsidy on the benchmark price of $612 a tonne only, international prices are ruling high.

According to the notification, the fertiliser companies will be required to print MRP on each fertiliser along with applicable nutrient-based subsidy per bag.

Any sale above the printed MRP is punishable under the Essential Commodities Act, it added.

The annual requirement of DAP in India is about 11-12 million tonnes. Over 8 million tonnes is met through imports from Morocco, Jordan, China, the US and the rest is produced indigenously.


Nifty hits 5,700-5,770 and corrects marginally. Bias remains up as long as 5,400 holds in corrections

Buy on dips close to the support levels, with a strict stop loss below the 5,400 level, keeping in mind target levels

S&P Nifty close: 5660.65

Market trend
SHORT term: Up; MEDIUM term: Sideways; LONG term: Up

After a subdued first half, the Nifty rallied to the projected resistance area of 5,700-5,770 and corrected marginally on the last day of the week. In the process it failed to cross the resistance line (depicted in purple in the weekly chart above), resulting in some profit-taking by the Bulls that saw the Nifty close a paltry 33 points (+0.59%) higher. However, volumes were lower during the week. The sectoral indices which led the rise were BSE Realty (+7.12%), BSE Consumer Durables (+4.15%), while the laggards were BSE Metal (-1.22%), BSE Oil & Gas (-0.20%) and BSE PSU (-0.18%).

The sustained rise of the last few weeks has resulted in the histogram MACD moving above the median line, implying that the intermediate term bias is turning sideways, if not up at this moment. The Nifty seems to be retracing either the fall from 6,181 or the entire decline from 6,338 points, which gives upside targets of 5,767 (50% of 6,338-5,195 came very close to this), 5,804 (61.8% of 6,181-5,195) and 5,902 (61.8% of 6,338-5,195).

We saw the Nifty close above the 20wema pegged at 5,588 points for the second week running and this should provide immediate support. The Fibonacci retracement levels of the recent rise from 5,195-5,740 are 5,532 (38.2%), 5,468 (50%) and 5,403 (61.8%), which are the support levels to watch out for in corrections. The 5,403 points level also coincides with the trendline support (in black).

Here are some key levels to watch out for this week.

  • As long as the S&P Nifty remains below 5,670 points (pivot), the Bulls will be under some pressure.
  • Support levels are pegged at 5,600 and 5,540 points.
  • If the S&P Nifty sustains above the 5,670 points level in close, it could reach 5,730 or 5,800 points.


The Bulls have succeeded in putting the Bears on the back foot. The Fibonacci support levels mentioned above should act as support in declines. As long as any correction does not break the 5,400 level on a weekend close, the Bulls hold the edge and the Nifty should try to get to the 5,804 or 5,902 levels in the weeks ahead. For this to materialise, the Bulls have to push the Nifty above the resistance line (in purple) on significantly higher volumes. In a nutshell, one should buy on dips close to the support levels, with a strict stop loss below the 5,400 level, keeping in mind the target levels.

(Vidur Pendharkar works as a consultant technical analyst and chief strategist at


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