Sun, 15th May: IIP @ 7.3%, are we getting it right

India’s Industrial output registered a sharp rise in March, beating analyst estimates. Industrial output rose to a five month high of 7.3% in March. The smart rebound in factory output signals that overall consumer demand remains strong despite of rising borrowing rate. The IIP rose to almost double the revised 3.7% expansion in Feb, according to the data. Most of the prediction was near to the 4% mark. Some analyst could not digest a sharp rise in the IIP data and feeling in the market was that there is some catch in the data or the data is wrong. Markets reacted negatively after the data was released. Food Inflation drops to lowest since March 2009 to 7.7%. But still the Rate hike is there on the cards. Another round of rate hike will be there sooner or later. Major Indices closed flat on week on week basis. Midcap Indices rose 0.6%. Bank Nifty closed down 1% from its previous week close. Fmcg and Reality Index were the major gainers which climbed nearly 4% in a week. Healthcare sector which are generally considered to have defensive position in the portfolio rose nearly1.25%. Cap goods closed down 0.87%. IT index trimmed by 0.3%. HUL was the major gainer which rose nearly 11% in a single week. Bharti Airtel surged 5.5%. Healthcare Index gained but Sunpharma tanked nearly 4%. M&M lost 3.3% which Idfc, Hdfc and Maruti were down by 4.3%, 3.5% & 4.1% respectively in the Nifty Index. Nifty bounced back in the last week but on the last trading session. But as I mentioned that the gain could not sustain and Nifty will once again face resistance at 5640-5680 levels. Markets once again corrected. Nifty after taking support at its 23.6% retracement levels, bounced back on the last trading session of the last week. But started off with the next week with a bitter taste. Markets corrected for most of the week but gained on the last week to close the Nifty and Sensex almost flat on week on week basis. Nifty might have tried taking support at its 23.6 retracement levels once more but still we are not sure about the markets. Upside there’s lot of resistance levels at 5640-5680 levels. Downside if Nifty closes below 5450-5500 levels then we can surely see Nifty trading near 5200 in some days. If we look at a big picture in the Nifty chart. From mid Oct to the current levels, Nifty is been trading with the trend lines no. 1 & 2.In Mid March and Mid April nifty faced severe resistance at the trendline and corrected heavily 5900 levels to 5500. Nifty might again take support at the same and bounce back. 2 consecutive closes below the same will take the Nifty to 5200 levels. For rally, Nifty has to close above its 38.2% retracement levels or 5640 levels. This Weeks call Buy DLF above 132.5 with SL 228. Buy HDIL above 160 with SL 158. Buy LIC above 224.50 with SL 222.