BACK ON THE SIXTEEN WALL , BUT FOR HOW LONG ?
Last month, the Sensex had flirted with the 16000 level, when it barely touched the 16002 mark in intraday terms on 4th August. But in this month it has closed above the coveted mark, not once but four times in a row. There have been just 8 months in the history when the Sensex has seen a close above the 16,000 mark.
While the Sensex closed consecutively higher an all days of the week, it is yet to close convincingly above the trendline that is made by joining the highs 15600 ( 12th June) and 16002 ( 4th August). The desired target for Monday is 16350 plus. As it is an upward sloping trendline, the bar would be raised each day. However, it is still not a difficult job, as a level of 16434 was seen Thursday. The point is that Nifty is well over its similar trendline joining the June and August highs, so if both do so, the duo could tango for a while, much to the chagrin of bears.
The US markets had failed to rally on Friday on better than expected reading of the University of Michigan’s Consumer Confidence survey. The survey came in higher at 70.2 as against August’s 65.7.
I don’t really hold the consumer confidence as a strong indicator of the economy or the real intention of the consumer to spend. It gets swayed by the markets if they are doing well when the polls are being conducted. The real taste of the pudding is in eating and that is the retail sales, which will come in later during the month.
Among the global markets that matter, China did better with the Shanghai Composite gaining 4.48% against the Sensex’s 3.67% surge. The Chinese surge came on the back of comforting data. Their industrial output grew at a 12 month high of 12.3%. And contrary to expectations the M2 money supply increased 28.5%. The easy money supply can be partly explained by the desire of the Communist party to leave nothing to chance in its 60th anniversary celebrations of their rule, which falls on October 1.
Dalal Lama’s visit to Arunachal Pradesh, an integral part of India, which the Chinese have superfluous claims on , has drawn objections from our northerly neighbour. I hope that the Government will have the nerves to allow the visit to progress as scheduled.
While the Chinese have a well laid out road network along our borders, even joining them with POK, we are in a mess when it comes to our border road network. It’s highly agonising that we do not have an all weather road to the border town of Mana, where landslides wash away section of the road near Lambagarh. The Manali- Leh highway is best called a cart track beyond Keylong. As these places are on the popular trail, we have the knowledge, god only knows the state of the roads beyond the inner line.
Not only for our own defence but also for the nation’s infrastructure, we need to develop roads at break neck speed. We will cover this sector in one of the future columns. Suffice is to say that road equipment making companies and the ones that build them have a huge canvass to paint on.
With Gold closing at an all time high on the weekly charts, the yellow metal is being chased by the retail investors as well. While a hump of $ 1000 a troy has been crossed, it’s further progress will be a function of how the Dollar behaves. The music could continue for the precious metal as long as the Dollar remains on the back foot.
The late precipitation may not really help the cause of the Kharif crop but would help the Rabi crop as the soil moisture reaches desired levels. But the biggest beneficiary of this late bounty are the reservoirs, where the water levels have risen off late. The level of water stored in 81 reservoirs across the country has increased from 38 per cent of the total capacity of 151 billion cubic metres (bcm) last month to 51 per cent of the capacity currently. Hopefully, drinking water shortage may not be as acute as was being projected and the power situation should be less worse than feared. Despite the late inundation, the reservoirs are way below last year’s levels.
The rain deficit for the June-September season has narrowed to 20 per cent from 23 per cent a week earlier. However, it is still within the definition of a draught. And late rains may reduce the deficiency for the records but will do nothing for the Kharif crop, specially the one that has already wilted or was never sown before the gods decided to have a change of mind.
The Open Interest in derivatives crossed the Rs 1,00,000 mark to close at 1,02,000. This is the highest level of OI seen for the same number of days into the settlement since January 2008. This, however, is neither bullish or bearish. The 16,000 level in the Sensex and the 4750 in the Nifty need to be protected. As long as this is being ensured, the bulls need not worry. But a violation on the downside, should order an evacuation from the higher bullish camps. |
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