By VK Sharma
The markets’ volatile behaviour last week had the traders rattled as Nifty yo-yoed between 25,473 and 25,900 as it closed with a miniscule gain of just 11 points, or 0.04%, for the week at 25,694.
You would recall that for the week ended January 9, once the Nifty had breached trendline number 85 (see chart) on January 8, it could never reach the trendline despite several attempts. Since this is an upward sloping trendline, the asking rate to resume the uptrend will keep on rising each day. Currently, it is placed at 26,090 for Monday.
But the first resistance is at 25,875 from the 50-day double exponential moving average (Dema).
The first support for the Nifty is at 25,473, the low formed on January 12 and then at 25,157, the level of the 200 Dema.
There are many triggers for the markets apart from the corporate results, like the breakout of hostilities between nations as the world sits on a keg of powder. Or the signing of the trade deal or breaking of one.
A trade deal with the US has remained elusive because the US has tried to dictate terms to India which New Delhi is in no mood to accept. A trade deal between two sovereigns makes sense only if it is fair and reciprocal.
So, even as Trump threatens and US ambassador to India, Sergio Gor, cajoles, India is busy signing mutually-beneficial trade deals with likeminded countries.
President of the European Council Antonio Costa and President of the European Commission Ursula von der Leyen will be the chief guests for the Republic Day Parade. During their stay, they will sign, the mother of all trade deals, a free trade agreement (FTA) with India that will bring the tariffs to zero by 2027-30 from the current 8-12%. The trade could potentially double from the existing $136 billion in goods and $60 billion in services by 2030-31.
The proposed deal with the EU leaves agriculture out. This honours the redlines drawn by India. Just like the FTA with New Zealand that left dairy out.
While the EU economy may be slowing, at $22.5 trillion, it is still the second-largest economy in the world with 35 million high disposable income consumers.
Sweeteners in the form of defence orders are in place. India has chosen its equipment suppliers well. The Rafales not only come with source code, but there are also no restrictions on end use and timely delivery which the US cannot match. Besides, you never know when the US could switch on the kill button in their crafts. Russian fighter jets could have triggered sanctions from the US. Besides, with Russia embroiled in Ukraine, there were serious questions on timely delivery for India.
The trade deal with the EU has the power to change the sentiment.
(The author is a technical analyst, and former head of clients’ group, HDFC Securities)
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.