Nifty has support at 5541 & 5501 levels - Alex Mathews

Markets had opened on a positive note tracking Asian peers and the tremendous gains made in the US markets overnight. But it could note hold on to the gains at higher levels and started falling. In the second part of the day we saw the markets slipping into red and fell further to close for the day in red near to the day's low. Most of the Asian as well as European markets retained their gains of the day but our markets came down in the second half of the day. The main reason for the downside was the rising inflation and its possible effect on the corporate earnings. During the day Wipro fell after saying that its net income was little changed in the quarter ended June 30 while Dr Reddy's results was below expectations. This created a feeling that the rising inflation and rising interests rate have started to show their effects on the corporate results. Results which were already announced also didn't show a good trend as well. Also the comments from the deputy chairman of India's planning commission that the country will take several months to bring down inflation with its comfort zone added fuel to the fire along with the FM's comments that the country's export growth may not sustain as European zone is under the debt woes. The market breadth, indicating the overall health of the market, was negative. On BSE, 1,752 shares declined and 1,127 shares advanced.

Nifty today closed below the middle Bollinger band of 5584 and this level has become its immediate resistance above it has resistance at 5613 and 5650 while the support is there at 5541 and 5501 levels. A meeting of Euro zone leaders is scheduled tomorrow to finalize a bailout package for Greece to restrict the spread of the crisis and so expect markets to remain sideways.

On the sectoral front, power, capital, healthcare, auto and banking were the major laggards when most of the sectors were down. Pharma stocks fell after Dr Reddy's results were below expected lines. Auto mobile stocks and banking stocks after the comments from the Finance Minister and deputy chairman of planning commission hinting at chances of further rate hikes which will negatively impact the earnings of the companies in coming quarters as well. Apart from these, stocks in the paper manufacturing, cycle, ply board makers etc made gains.

Asian markets were all trading in green on better expected earnings. European markets too were in green on expectation that US lawmakers may agree to raise the debt limit. Chinese markets had positives within it to move up as a Chinese indicator showed that the growth in the country is quickening. But comments from IMF that Greek crisis poses serious contagion risk even without default remains a concern. Apart from that, 5 of 15 states with top bond ratings from Moody's may be downgraded because of their dependence on federal revenues making them easy target of US credit cut. US index futures were trading high on the back of better than expected results posted by Apple Inc and on expectation that US existing home sales probably rose in June. On the commodity front, oil climbed above $98 on expectation that US crude inventories may shrink when the data comes out later in the day. Gold is witnessing short term profit taking after the recent rally but is looking extremely positive given the uncertainty in US and Europe.

Source : Equity Bulls

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