Nifty seen touching 5,200
Tracking global cues, the domestic equity markets will see further gains this week. In the past couple of weeks, the Bombay Stock Exchange benchmark Sensex and the National Stock Exchange’s Nifty have seen a near-five-per-cent rally from their recent lows.
The S&P CNX Nifty index will rise to touch 5,200 levels on the back of further short covering by large traders, say market players.
After this level, there could be some volatility. The benchmark equity index had closed at 5,084 on Friday. The Sensex stood had at 16,933.
“The indices rose as it is difficult for bears to build new short positions, given global developments,” said CNI Global Research Managing Director Kishor Ostwal.
Traders globally were eyeing the crucial US Federal Reserve policy meet scheduled for September 21 and 22. Fed Chairman Ben S Bernanke, in his speech last month at Jackson Hole, Wyo, had hinted that the US had additional tools to tackle the current slowdown.
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US markets had crashed in August after leading rating agency S&P downgraded its debt with a negative outlook. This had spooked traders. There was a belief that the US had run out of options to tackle debt crises.
Although another stimulus package for the US economy has been discounted by experts, traders had been waiting for some confidence booster from Fed in days ahead. The US housing market data, to be published this week, will also be watched.
A wave of positive sentiment saw the global markets recover from their multi-year lows last week, as the European Central Bank (ECB) bought more time by extending an emergency lifeline to banks, driving the week’s biggest advance in the stock markets.
The contagious debt crises spread across Europe in just over a year, after smaller counters like Greece were said to be moving towards default on their sovereign loans. However, French President Nicolas Sarkozy and German Chancellor Angela Markel said they were convinced Greece would remained in the euro zone, which put doomsday theories to rest, at least for the time being.
The S&P 500, top US equity index, climbed to its highest level since August 31 after European Central Bank President Jean-Claude Trichet pressed euro area governments to take decisive action to halt the debt crisis.
Due to this prevailing global sentiment and a marginal fall in crude oil prices, share prices escaped the brunt of a 25-basis-point increase in key interest rate by the Reserve Bank of India (RBI) and a hawkish stance taken by it. Brokers say huge short positions were built in stocks and a covering of such positions after the global development was taking the index higher.
Also, traders are of the view that recent news of an amnesty scheme to bring black money stashed abroad back to the country would be positive for stock markets. A large portion of such money, they believe, will be ploughed into equities as an when allowed.
In another major event, Finance Minister Pranab Mukherjee and his counterparts from Brazil, China, Russia and South Africa will discuss the state of the global economy and policy responses during their meeting in Washington on September 22.