Market View:Equities to stay under pressure, 4200 crucial for Nifty

Given the mounting concern over global economic slowdown and dark clouds over the Indo-US nuclear deal outcome, Indian stock markets are likely to stay under pressure in the coming week. However, analysts don't expect sharp downside.

4200 level on Nifty should be watched. Negative overseas cues will certainly have a major impact on the Indian markets in the near term. Unless Nifty crosses 4450 level, we may not see any significant positive breakout.

On Friday, markets opened with a gap down on weak global cues and remained subdued throughout the day. Global markets fell sharply due to fears of slowdown in the US, which showed discouraging employment data for the month of August with payrolls down 75,000 after declining by 51,000 in July.

We don't see any significant downside for the markets in near term. Nifty will be range-bound and will oscillate between 4200-4600. At present our advice investors to stay invested in sectors like pharma, FMCG and oil and gas exploration. However, avoid interest rate sensitive sectors.

F&O Activity

Put writing at 4200 level and huge build up of positions at 4400 (call buying) should hold Nifty above 4200. Our will advise investors to go long at every dip. However, if Nifty breaches 4200 then stay away till it gets clear direction.

Global Slowdown

Almost $17 trillion has been wiped off global stock markets since the peak in October 2007. Right now we are experiencing the follow-up impact of the financial crisis and its effect on economic growth.

Rising jobless claims in US have heightened concern the economic slump is worsening.

The unemployment rate is likely to stay at a four-year high of 5.7 per cent. US pending home sales will be detailed on Tuesday, job less claims on Thursday and retail sales and consumer confidence numbers on Friday which will decide the US economy outlook as well as the global markets scenario over the next week.

The ECB on Thursday cut its 2008 economic growth forecast to 1.4 per cent from 1.8 per cent and its 2009 prediction to 1.2 per cent from 1.5 per cent.

NSG Meet

The Nuclear Suppliers’ Group is meeting in Vienna on 4th and 5th of September to review a fresh US proposal to exempt India from 45-nation cartel's requirement of full-scope safeguards as a condition for nuclear exports (something India refuses to do since it has a nuclear weapons program).

China, which has so far remained ambiguous with regard to its position at the NSG meeting, also came out openly against the Indo-US nuclear deal, with the Communist Party's mouthpiece 'People's Daily' saying it was a 'major blow' to non-proliferation.

Crude oil

Crude traded below $107 a barrel in New York, set for its biggest weekly slump in a month as the dollar gained, curbing demand for commodities as a currency hedge.

The falling commodity prices are pushing commodity producers lower on concern earnings may deteriorate.