Nifty hopes rest on FOMC meet, else 4700 is next stop

Turbulence in global markets has thrown Indian equity indices into a tizzy. The result: Huge swings on the bourses for yet another day. Amid acute volatility, the 50-share Nifty managed to cope up from sub-5,000 levels settling at 5,072, down 45 point. The Sensex also yo-yoed to finally closed 132 point lowered at 16,857.

However, considering the heavy turbulence that the market saw following unbelievable volatility globally, today's performance can't be labeled 'bad'. From an India perspective, we will mirror whatever happens globally, Rajiv Anand, managing director and chief executive officer of Axis AMC says. "The Indian story is not being noted; the fact that commodity prices have come down and therefore the macro picture looks much better. Also, input cost are going to go relatively lower, which will lead to the micro company profitability looking much better. I think that is all in the medium to long-term. The market is not distinguishing between commodities, equities and bonds at this point in time," he explains.

In unison David Pezarkar, head of equity at Daiwa Mutual Fund says how the market will perform depends on the situation in the European world and in the US. "What is happening is that people are realising that the long-term growth projections for those economies have taken a deep tumble and the markets there are getting rerated or rather de-rated to that fact," he says.

But will the gash deepen?

According to Outlook's consulting editor Devangshu Datta 4,700-4,800 looks likes a reasonable key support zone. "Somewhere between 4,750 and 4,800 is what the consensus estimate seems to be. Breakevens would be in around 4,690. If you are talking slightly more long-term then we are in a reflexive situation where the market could react much more than is rationally justified," he explains.

However, Pezarkar feels otherwise. Calling the fall over-done, he says we could see some sort of slight bounce back at least in the next few days. "If we hear some bit of good news (from the Fed) tonight, then I think we should see a slight bounce back. Until the re-rating process completes itself and the markets there stabilise, I do not see how our market can really rebound from here.”

On the reversal of trend, Datta sees 5,170-5,225 as the first zone of resistance, followed by 5,325-5,350, which will be the second resistance zone. "If it pulls back to about 5,225, it will probably test 5,325. Also, If the Feds policy meet springs positive surprises, then the market could go to around 5,325-5,350. However, anything above that is quite unlikely," he adds.

Datta is looking at a stop loss in the 5,150-5,200 range. "In fact, possibly I would do something like hold a long 5,300 call or maybe even a 5,400 call. The point being that those are fairly cheap and they would gain considerably if the market jumped 100 points," he points out.