IIP data, weather to decide course

MARKET OUTLOOK

Indian stocks are at a crucial support level. If the indices break crucial support levels, the upper side resistance will become stronger.

The Sensex crossing its all-time high level seemed imminent at the beginning of last week but global cues and events changed the course. In fact, June may maintain the current market volatility.

On the back of the turbulence in the Chinese market, came the bad news from Europe last week. The European Central Bank had raised the interest rates to a six-year high.

As bond yields were rising sharply in the US, international investors assumed that America may actually raise the rates in the near future. This triggered selling that let the markets down.

After a long gap, Indian markets saw dampening effects in the last hour of trading as cues started coming from the European markets. If Asian markets follow the US performance on Friday and open with some optimism on Monday, India will find some short-term support.

On Friday, the US stock market rebounded, ending a three-day slump, after bond yields retreated from the highest level in five years and oil prices fell.

Domestic cues will be available from the industrial production data, which might be announced on Tuesday. It will give signals about the effectiveness of the RBI measures to control overheating in the economy.

Even the weather will play its part. Markets will find a reason to fall if the monsoon gets delayed. Early rains could help the fertiliser and agro-chemical sectors and companies such as Mahindra & Mahindra will see a surge in tractor demand.

Cement stocks can expect a dull season. With low demand and saturated prices, some fall is expected. The auto stocks are also not doing well as automobile majors are on a production mode and the market will continue to discount this as seen from the selling.

The recent fall of the rupee could help export-dependent companies, especially IT firms and boost the realisation.

Some expectations on the sugar and textile fronts on the incentive package being announced had also helped the market to withstand the selling pressure.

Such sector-specific developments should be watched. Markets would also look at factors, which would help find support at lower levels. The market would be favouring DLF and ICICI Bank issues in the primary market.

Foreign investors interest is intact. Said a Singapore-based fund manager, "Many FIIs want to enter Indian markets . Even if the market does not fall for a few days, they are willing to enter at the current levels." If FIIs do this, it will provide the required boost to the bulls.