The markets were on a roll last week and in a mere three days have made new highs for the calendar year 2016. The resistance zone was crossed comfortably and we are already over 2.5% higher than the resistance point. The trigger point for the rally was Skymet upping the monsoon to 109% of the long term average which simply means that the monsoons would be bountiful and help in satiating the thirst of a parched mother earth. This augurs well for the economy which has suffered two consecutive droughts and affected agriculture and food production. The concerted efforts of the government in bringing down inflation have all but paid off, but for food inflation where there is genuine supply side constraints.
Coming to the markets it all began on Wednesday when the market made its first big move and gained over 2%. The next day saw May series futures expiring and bears were scurrying for cover when they saw the all-important 7,980 on NIFTY being breached. Friday was the beginning of a fresh series and bulls pressed home the advantage with another day of strong gains. Very clearly even without the rains it pouring on Dalal Street.
Global markets too gained with Dow Jones up 372.28 points or 2.13% to close at 17,873.22 points. The Indian Rupee two gained 41 paisa or 0.61% to close at Rs 67.03 to the US Dollar.
Friday saw the largest PSU bank State Bank of India which reported a higher than expected number of NPA but the stock rallied sharply. SBI gained Rs 11.80 or 6.42% on Friday and Rs 24.10 or 14.06% for the week. It has been noticed that though the quality of assets has deteriorated there is a perception that the PSU banks have probably seen the worst and with the good monsoon expected, bad loan recovery would happen. It is this optimism which saw many PSU bank stocks gaining during the week along with private banks.
Primary markets have been quiet and there has been no issue after the last virtually back to back three issues which began with Thyocare, Ujjivan and Parag. While there are many issues in the pipeline they are probably waiting for the monsoon to actually break before launching the issue. Only hope that pricing remains fare otherwise things could go awry.
The week ahead would in all probability see some consolidation after an over 5% gain in the benchmark indices. The fact that markets have broken out of a technical resistance after almost seven months is a positive factor and the previous resistance would now act as support. The crucial time period is the next three days and things should hold. Trading opportunities would exist as markets are already super volatile and are likely to remain so in the week ahead. Trade and take some money of the table where profits exist.
